Interest rate speculation is rife after the Reserve Bank of Australia (RBA) kept rates on hold at 4.35% last month. Economists now predict it may be several months before rates fall. It’s a different story in the United States, where the Federal Reserve slashed interest rates by half a percentage point in September and forecast two more cuts before the end of the year.

Australia’s inflation rate fell to 2.7% in August, down from 3.5% the previous month, marking the lowest reading in three years. Falling petrol prices and energy bill relief helped drive the slowdown. The jobless rate remained steady in August at 4.2%, with the number of unemployed people falling by 10,500 in seasonally adjusted terms. While spending may be down, our net worth rose for the seventh consecutive quarter. Total household wealth was 9.3% higher than a year ago, largely due to rising house and land values. Consumer confidence is also positive, with an increase in the ANZ-Roy Morgan index compared with last year’s figures.

The S&P/ASX 200 index hit an all-time high near the end of the month at 8,862 points, after reaching a low of 7,687 a few weeks earlier. It closed the month at a respectable 8,266, up 2.2% for the month and 7.89% for the year. China’s plan to stimulate its economy has led to stronger commodity prices, with mining and energy stocks being the main beneficiaries.

If there is something affecting your financial situation that you would like to discuss, please do not hesitate to reach out to our team.

Navigating complex family relationships and blended families can be challenging at times and particularly when a family member passes away.

A good estate plan can help to make sure your wishes are carried out. An estate plan, of which a will is the first and most important part, can ensure your estate is distributed in the way you want. It can also help if you become incapacitated, particularly when it includes an enduring power of attorney and a medical power of attorney that indicate who should oversee your affairs and any relevant instructions.

Professional advice is vital in estate planning to make sure that you have considered all the issues, including tax matters, and that your loved ones are protected. It is also important to clearly communicate your wishes, particularly when there are complex family dynamics involved, so that your wishes are clearly understood.

Your adviser would discuss any relevant matters with you. Here is a reminder of some of the issues to consider.

Superannuation

Deciding who gets your super when you pass away is more complicated than deciding what happens to your personal assets like property through a will. This is because superannuation is held in a trust by the super fund’s trustee, not in your name directly.

A binding death benefit nomination should be at the top of your list when you are considering the distribution of your superannuation funds.

This makes certain that your super death benefit is paid to those you choose because without one, the trustee of your super fund will make their own decision.

The nomination is usually valid for three years before it lapses and must be renewed. It’s a good time to review your nomination if your family dynamics change.

Blended families

If you have been married more than once and/or have children with more than one partner, your will helps to effectively provide for those you choose.

You may wish, for example, to ensure that your children receive the proceeds of your estate rather than your spouse or ex-spouse. Alternatively, you may need to ensure your will protects your current spouse from the claims of previous spouses.

When it comes to the family home, the type of home ownership is important. If you have purchased as ‘joint tenants’, the entire asset will pass to the surviving spouse. On the other hand, if you have purchased as ‘tenants in common’, each spouse can distribute their share of the house to others.

You may also wish to include a ‘life interest’ in the home so that your current spouse can continue to live in the home until their death before it ultimately passes to your other beneficiaries.

Trusts

Any existing family trusts should be reviewed with a blended family in mind. Check that the trust deed provides clear instructions for succession, if you want to ensure your children from past relationships are catered for.

Your will can also establish new trusts, known as testamentary trusts, to provide for any dependents with disability, if you are worried that a child may misuse your assets, or to allow for young children.

A testamentary trust can also help to protect your adult child’s interests if they were to divorce a partner or are facing bankruptcy. Any inheritance they receive from you would become part of their property and can be considered in a divorce settlement or called on by creditors.

Handing on a business

If you are in business with partners or would like to hand on the family business to one child but not others, a life insurance policy may be a useful strategy – sometimes known as estate equalisation – to even the distributions from your estate.

In the case of a business partnership, you would name your partner or partners as beneficiaries of the life insurance policy, to effectively ‘buy you out’ of the business. Where it’s a family business due to be handed on to one child, your life insurance would go to your other children to match the value of the business.

Note that it is crucial to continually review the value of the business and the value of the life insurance to ensure they remain current.

Estate planning can be tricky and emotional, particularly when your circumstances are a little more complex. Get in touch with our team of experienced financial advisers to help guide you through the planning stages so that your estate plan meets your wishes and takes account of all the issues.

Occasionally, people want to change aged care homes. Moving to a new aged care home can offer many benefits for residents, such as being closer to family or enhanced services. However, it is crucial for decision-makers to fully understand the financial implications of moving to another aged care facility, especially if the resident’s circumstances have changed since the initial financial assessment by Services Australia.

What are the financial implications?

Potential increase in fees

• Accommodation Costs: The cost of accommodation can differ greatly between facilities. A new aged care home may charge higher accommodation fees, including a Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP). It’s important to compare these costs to understand how they might affect your budget.
• Additional Services: Some facilities offer services or amenities that may come with additional costs. Make sure you are clear about what is included and what extra charges may apply. It is important to note that homes that accept low-means/concessional residents may have lower-quality fittings and fixtures, but the level of care you receive should be the same as homes that do not accept concessional residents.

Reassessment of financial status

Moving to a new aged care home often triggers a reassessment of your financial status by Services Australia’s residential aged care department. If your financial situation has changed since your initial assessment, the outcome of the reassessment can significantly affect the fees you will be required to pay. The reassessment may lead to one of three outcomes:

• No change: If there have been no significant changes in your financial situation, your status will remain the same. For instance, if you were originally assessed as a low means resident, your accommodation cost will be assessed the same.
• Loss of low means status: If your assessed assets have increased, you might lose your concessional (low means) status, resulting in higher fees as you would be classified as a financial resident. This is explored further in the scenario below.
• Change from financial to low means/concessional: If your financial situation has worsened, you might qualify for concessional status, which could lower your fees if the government assessed accommodation contribution is lower than your current DAP.

Scenario: Supported resident transferring to a new aged care home

To highlight the importance of these financial implications, let’s look at a recent case Alteris’ Lifestyle and Care Team handled for a supported resident.

Initial financial status

The resident originally entered permanent care as a partially supported (concessional) resident. They were paying a low Daily Accommodation Contribution (DAC) because while they had a modest level of savings, their former home was exempted from aged care fees, thanks to a Protected Person living there.

Change in financial circumstances

Later, the resident’s financial situation changed when the Protected Person status ended. This meant their home was no longer exempt from aged care fees. While still receiving subsidised accommodation, the change led to an increase in the DAC to the maximum rate of $68.14 per day. Additionally, a means-tested care fee could also apply at this stage.

Impact of moving to a new aged care home

• New Means-Assessment: Upon moving to a new aged care home, a new means-assessment is triggered if it’s been more than 120 days since the original assessment. In our example case, without the protected person status exempting the former home, the resident would now be re-assessed as a financial resident and pay fees at the rate agreed with the new aged care home.
• Accommodation Fees: The resident would then be required to pay for accommodation as a Daily Accommodation Payment (DAP) or Refundable Accommodation Deposit (RAD). Based on an assumed RAD of $500,000 and the current maximum permissible interest rate (8.36%), the DAP would be $114.52 per day.
• Financial Impact: This represents an increase of $46.38 per day above the original maximum accommodation contribution of $68.14 per day. This increase needs careful consideration to ensure it is sustainable for the resident.

Planning

It’s essential to carefully review changes to cash flow requirements and the overall financial situation thoroughly before the move. To comfortably manage the increased accommodation fees over the medium to long term, there may need to be changes, for example, possibly using the former home to pay the DAP/RAD.

We are here to help, every step of the way

Moving to a new aged care home can greatly enhance quality of life, but it’s important to ensure that the resident and their decision makers are fully informed about the financial consequences. Careful planning and consideration of your financial situation will help ensure that your decision supports both your well-being and financial stability.

Our advisers can help by referring you to Alteris Financial Group’s Lifestyle and Care Team. Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all options and explain the various financial considerations. They can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different retirement income options that your adviser will discuss if you or someone you know is approaching retirement. ⁱ

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

• Tax benefits – Investment earnings, capital gains and withdrawals are tax-free, unless you have an untaxed component within your super.
• Payment flexibility – Subject to pension minimums, most super funds allow you to adjust the payment amount and frequency, and even make partial or full lump-sum withdrawals if needed. You can also return to work and continue to receive a pension.
• Longevity and market risks – You might outlive your account balance, especially if your withdrawals are high or your investment returns are poor.

Transition to retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working if you have reached age 60 (based on current rules). ⁱⁱ

Some considerations:

• Flexible work options – You can reduce your working hours and supplement your income from your super.
• Limits on pension rates – Like an ABP, there is a minimum annual pension rate. However, there is also a maximum annual withdrawal of 10 per cent of your TTR account balance.
• Reduced retirement savings – Drawing on your superannuation while still working means your retirement savings might grow more slowly.

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are several types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

• Predictable income – Provides a stable income stream, which can be reassuring for financial stability and provide an income for as long as you live.
• Lack of flexibility – Once you purchase an annuity, the terms are generally fixed, and you cannot alter the income amount. There is a restriction on capital withdrawals or in some instances no access to capital at all.
• Inflation risk – Fixed non-inflation-linked annuities may not keep pace with inflation unless specifically indexed to inflation.

Innovative retirement income stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

• Age Pension benefits – Centrelink only counts 60 per cent of the pension payments received as assessable income and only 60 per cent of the purchase price of the product counts as an assessable asset until age 84 when it is reduced.
• Certainty – Some IRIS products offer a stable guaranteed income stream, providing financial security.
• No minimum requirements – IRIS products do not require an annual minimum amount, instead just requiring at least one annual payment.
• Complexity – Features vary widely between different IRIS products and may involve complex terms or conditions.

Next steps

Receiving expert financial advice can help retirees to understand the various funding options available to them and whether they align with their lifestyle goals for retirement.

Consulting with your financial adviser can help you understand whether these options suit your personal needs and how they might affect your retirement income. If you know a friend or family member who could benefit from expert retirement planning advice, please contact us so we can assist in structuring a plan to fund the retirement lifestyle they have worked so hard to achieve.

Sources

 i Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)

Employers need to ensure that payroll systems reflect recent legislative changes, while the ATO is highlighting deduction opportunities available to some small businesses. Here is your roundup of the latest tax news.

Update employer obligations

The ATO is reminding employers to stay on top of legislative changes affecting payroll systems.

The Super Guarantee rate increased on 1 July 2024 to 11.5 per cent of ordinary time earnings, so all payments (starting with those for the July to September quarter) to super accounts for eligible workers must reflect the new rate. ⁱ

Individual income tax rate thresholds and tax tables also changed on 1 July 2024, so you may need to check calculations for your Pay As You Go Withholding obligations.

Claims for energy expenses

Many small businesses are eligible for a bonus 20 per cent tax deduction for new assets (or improvements to existing assets) that support more efficient energy usage.

The Small Business Energy Incentive applies to eligible assets first used or installed and ready for use between 1 July 2023 and 30 June 2024. ⁱⁱ

Eligible expenditure on external training courses for employees incurred between 29 March 2022 and 30 June 2024 could also qualify for a 20 per cent bonus tax deduction under the Small Business Skills and Training Boost. ⁱⁱⁱ

Pay less capital gains tax (CGT)

While a business can reduce capital gains made during a tax year by offsetting them with capital losses from the same or previous income years, not all capital losses are eligible. ^iv

Capital losses carried forward from previous years need to be used first, with losses from collectables (such as artwork and antiques) only permitted to offset capital gains from collectables.

Losses from personal use assets (such as boats or furniture), CGT-exempt assets (such as cars and motorcycles), paying personal services income to yourself through an entity you set up, and leases producing income (such as commercial rental property) are ineligible as offsets.

Fuel tax credit rates change

Before claiming fuel tax credits in your next Business Activity Statement (BAS), check that you are using the latest rates, as they have changed twice in the new financial year. ^v

On 1 July 2024, the rate for heavy vehicles travelling on public roads changed due to an increase in the road user charge. The rate changed again on 5 August 2024 due to a change in fuel excise indexation.

Different rates apply based on when you acquired fuel for your business use, so ensure you use the correct rate. If you are unsure, try the ATO’s online Fuel Tax Credit Calculator to work out the amount to report in your BAS.

Records essential for rental expense claims

Rental property investors without correct documentation to substantiate their expense deductions may find their claims declared invalid. ^vi

The ATO is warning investors they need all receipts, invoices, and bank statements plus details of how deductions were calculated and apportioned for a valid claim.

Lodging a ‘nil’ BAS

While taxpayers registered for GST automatically receive a BAS and are required to lodge and pay in full by the due date, businesses with nothing to report are still required to lodge.

If you have paused your business, you are required to lodge a ‘nil’ BAS by the due date either online or via the ATO’s automated phone service. ^vii

By taking proactive measures, staying informed, and seeking professional financial advice, you can navigate the evolving landscape of personal and business tax compliance with confidence. Our financial advisers can work with you to understand your tax situation and safeguard your financial wellbeing.

Sources

i How much super to pay | Australian Taxation Office (ato.gov.au)

ii Small business energy incentive | Australian Taxation Office (ato.gov.au)

iii Small business skills and training boost | Australian Taxation Office (ato.gov.au)

iv Pay less capital gains tax (CGT) | Australian Taxation Office (ato.gov.au)

v From 1 July 2024 to 30 June 2025 | Australian Taxation Office (ato.gov.au)

vi ATO warning to rental property owners: don’t let your tax return be a ‘fixer-upper’ | Australian Taxation Office

vii Cancelling your GST registration | Australian Taxation Office (ato.gov.au)

Welcome to spring, a season that can inspire personal, business, and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets—including the ASX—largely stabilised by the end of August after a turbulent month.

It was a rocky start, with global markets plummeting following news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the drama, the S&P/ASX 200 closed 1.28% higher for the month, marking a gain of just over 10% for the year to date.

A slight drop in inflation, down to 3.5% in July from 3.8% the previous month, had investors watching the Reserve Bank’s reaction. However, most economists agree that there’s little chance of an interest rate cut this year. The Reserve Bank of Australia (RBA) is not expecting inflation to reach its preferred levels until late 2026 or early 2027.

While the cost of living has dropped slightly, partly due to $300 federal government rebates on electricity bills, wages have risen. The Australian Bureau of Statistics reports that wages increased by 4.1% in the year to June, meaning that wages are now keeping pace with the cost of living.

The good news from the market and inflation data contributed to a small upswing in consumer confidence, although there is still much ground to recover after the losses caused by COVID-19.

If there is something affecting your financial situation that you would like to discuss, please do not hesitate to reach out to our team.

If you’re planning for retirement, you’re probably wondering if you’ll have enough saved to give up work and retire comfortably, especially with the rising cost of living affecting basic expenses like energy, insurance, food, and healthcare.

Fortunately, there is already a guide available to help you plan. The Association of Superannuation Funds in Australia (ASFA) updates its Retirement Standard annually, offering a breakdown of expenses for two lifestyles: modest and comfortable. ⁱ

Based on our average life expectancy – for women it is just over 85 years and men 81 – if you are about to retire at age 67, you will have between 14 and 18 years in retirement, on average, depending on your gender. ⁱⁱ

ASFA found that a couple needs $46,944 a year to live a modest lifestyle and $72,148 to live a comfortable lifestyle. That’s equal to $902 a week and $1,387, respectively. The figure is, of course, lower for a single person—$32,666 for a modest lifestyle ($628 a week) or $51,278 ($986) for a comfortable lifestyle. ⁱⁱⁱ

What does that add up to? ASFA estimates that, for a modest lifestyle, a single person or a couple would need savings of $100,000 at retirement age. For a comfortable lifestyle, a single person would require $595,000 and a couple would need at least $690,000 at retirement age. ^iv

A modest lifestyle means being able to afford everyday expenses such as basic health insurance, communication, clothing, and household goods but not going overboard. The difference between a modest and a comfortable lifestyle can be significant. For example, there is no room in a modest budget to update a kitchen or a bathroom; similarly overseas holidays are not an option.

The rule of thumb for a comfortable retirement is an estimated 70 per cent of your current annual income. ^v (The reason you need less is that you no longer need to commute to work, and you do not need to buy work clothes.)

Building your nest egg

So how can you build up a sufficient nest egg to provide for a comfortable life in retirement? There are three main sources: superannuation, pension, and investments/savings. Superannuation has the key advantage, due to the money in your pension being tax free in retirement.

Your superannuation pension can be augmented with the government’s Aged Pension either from the moment you retire or later when your original nest egg diminishes.

Your income and assets will be considered if you apply for the Age Pension, however, even if you receive a pension from your super fund, you may still be eligible for a part Age Pension. You may also be eligible for rent assistance and a Health Care Card, which provides concessions on medicines. ^vi

We understand that building wealth leading into retirement can be challenging. Our financial advisers can work with you to create a plan that will align with your goals and help grow your nest egg leading into retirement.

Money keeps growing

It’s also important to remember that the amount you accumulate up to retirement will still be generating an income, whether its rentals from investment properties or merely the growth in the value of your share investments and the accumulation of money from any dividends paid.

You can also continue to add to your superannuation by, for instance, selling your family home and downsizing, if you have lived in the home for more than 10 years.

If you are single, $300,000 can go into your super when you downsize and $600,000 if you are a couple. This figure is independent of any other superannuation caps. ^vii

Planning for a good life in retirement often requires just that – planning. If you would like to discuss how retirement will work for you, contact our financial advisers. Our team can discuss strategies and create a plan to help grow your wealth and build towards a fulfilling retirement.

Sources

i Retirement Standard – Association of Superannuation Funds of Australia 

ii Life expectancy, 2020 – 2022 | Australian Bureau of Statistics (abs.gov.au) 

iii https://www.superannuation.asn.au/media-release/retiree-budgets-continue-to-face-significant-cost-pressures

iv https://www.superannuation.asn.au/resources/retirement-standard/

v https://www.gesb.wa.gov.au/members/retirement/how-retirement-works/cost-of-living-in-retirement

vi Assets test for Age Pension – Age Pension – Services Australia

vii Downsizer super contributions | Australian Taxation Office (ato.gov.au)

Moving into residential aged care can trigger a range of emotions, particularly when decisions need to be made about the family home. The home is a major financial asset, and many people believe it should either be kept in the family, or its value preserved for future generations.

Whether the home must be sold to pay for aged care depends on several factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs (DVA) payments.

Cost of care

Services Australia’s residential aged care department determines the cost of aged care based on a person’s income and assets. ⁱ

For aged care fee purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A “protected person” is defined as either a spouse (including de facto), a dependent child or student, a close relative who has lived with the aged care resident for at least five years and is entitled to Centrelink income support, or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support. ⁱⁱ

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $206,039 per person, for the calculation of aged care fees. iii

Once your assessed assets exceed $206,039 each, Services Australia determines that you will pay accommodation costs at the rate agreed upon with the aged care home. This is known as the advertised Refundable Accommodation Deposit (RAD) or the equivalent daily interest rate, known as the Daily Accommodation Payment (DAP). There’s also the option to pay a combination of both the lump sum RAD and DAP.

The average RAD in metropolitan areas is $535,000, but just as property values vary significantly, so too do RADs, particularly in upmarket inner-city suburbs. Based on the current interest rate of 8.42% (effective from 1 January 2025), the equivalent DAP for a $535,000 RAD is $123.41 per day ($45,047 per year).

Depending on your combined assessable income and assets, you may also be required to pay a daily means-tested care fee. This means-tested care fee has an annual cap of $34,174 (indexed) and a lifetime cap of $82,018 (indexed).

This fee is in addition to the basic daily fee of $63.57 and any additional or extra service fees charged by your chosen accommodation provider.

Please note these fees are based on the current rules which apply to residents who commence permanent care prior to 30 June 2025. Aged care fees reform takes effect from 1 July 2025.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that will be left empty, selling it may be your preferred choice.

Other options to cover the costs may include using your other assets or income, renting the home (though this can increase the means-tested care fee and reduce the age pension), borrowing against the property, or asking family to cover the costs.

Centrelink pension rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule if the property is kept.

The home is exempt for pension purposes if occupied by a spouse; otherwise, it is only exempt for up to two years or until sold, whichever comes first.

If you don’t have a spouse living in your home and you move into aged care, then after two years, your property’s full value will be counted towards the age pension calculation. This could result in the loss of the pension.

However, money paid towards the RAD, including proceeds from the sale of a house, is exempt from age pension calculations.

Refundable deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. The full amount will ultimately be paid to the estate and distributed according to the person’s will.

We are here to help, every step of the way

The decisions around whether to sell your home to pay for aged care can often create stress both financially and emotionally for residents and their loved ones. Our advisers can help by referring you to Alteris Financial Group’s Lifestyle and Care Team. Alteris’ specialist division of financial advisers are accredited in aged care advice and can talk you through all options and explain the various financial considerations. They can also provide full support with ensuring the fees and pension are correct by working directly with your accommodation provider, Services Australia and the relevant government departments.

Sources

i https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs

ii https://www.myagedcare.gov.au/income-and-means-assessments

iii https://www.myagedcare.gov.au/income-and-means-assessments

What happens to a Self-Managed Super Fund (SMSF) when a trustee dies or becomes mentally impaired? While these are circumstances that many of us would rather not think about, spending some time planning now could make a significant difference for you and your family in the future.

Australia’s 620,000 SMSFs hold an estimated $933 billion in assets, so there is a lot at stake. ^I

But it’s not just about money; control of the SMSF is also important.

The best way to ensure that your wishes are carried out is with a properly documented succession plan and an up-to-date trust deed.

An SMSF succession plan sets out what will happen if you or another trustee dies or loses mental capacity. It ensures a smooth transition and is separate from your will.

It’s important to be aware that instructions in a will are not binding on SMSF trustees. Therefore, it’s essential to have a valid (preferably non-lapsing) binding death benefit nomination in place so the new trustees are required to pay your death benefit to your nominated beneficiary.

Your will cannot determine who takes control of your SMSF or who receives your super death benefit, as the fund’s trust deed and super law take precedence. ⁱⁱ

Succession plans also reduce the potential for the fund to become non-compliant due to overlooked reporting or compliance obligations. They can even provide opportunities for death benefits to be paid tax-effectively. ⁱⁱⁱ

Selecting successor trustees

Super law requires SMSFs with an individual trustee structure to have a minimum of two trustees, so it’s important to consider what will happen after the death or mental incapacity of one of the trustees.

An alternative to appointing a successor trustee is introducing a sole-purpose corporate trustee structure for your SMSF, as death or incapacity then does not pose an issue. This structure makes it easier to keep the SMSF functioning and fully compliant when a trustee transition is required. ^iv

Appoint a power of attorney

SMSF succession planning also means ensuring that your will is updated to reflect your current family or personal circumstances.

It requires having a valid Enduring Power of Attorney (EPOA) in place to help keep the SMSF operating smoothly if you lose mental capacity. Your EPOA can step in as a fund trustee and take over administration of the fund or make necessary decisions about the fund’s investment assets.

Checking compliance

When reviewing or creating a succession plan, it’s essential to ensure your wishes are fully compliant with the SIS Act and do not inadvertently compromise your SMSF’s compliance status. This should be part of your regular reviews with your adviser, who can ensure your trust deed, the SMSF’s circumstances, and the ever-evolving super legislation are all in sync.

Tax is an important consideration in estate and succession planning, as super and tax laws use different definitions for who is and isn’t considered a dependant.

Your SMSF can pay super death benefits to both your dependants and non-dependants, but the subsequent tax bills vary based on the beneficiary’s dependency status under tax law.

Problems that can arise due to the differences between super and tax law dependency definitions were highlighted in recent private advice (1052187560814) provided by the ATO. It found that even if a beneficiary was receiving “a reasonable degree of financial support” from a deceased person just before they died, they would not necessarily be considered a death benefit dependant under tax law.

There is also the potential for capital gains tax to be payable if fund assets need to be sold because your super pension ceases when you die. Nominating a reversionary beneficiary for your pension ensures payments continue automatically without requiring any asset sales. ^v

Inadequate planning can have far-reaching implications, impacting not only your assets but also your loved ones and their future. If you would like to discuss or require assistance with drawing up your SMSF succession plan, contact one of our financial advisers today.

Sources

i https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-newsroom/highlights-smsf-quarterly-statistical-report-march-2024
ii https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/paying-benefits/death-of-a-member
iii https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/administering-and-reporting/how-we-help-and-regulate-smsfs/how-we-deal-with-non-compliance
iv https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/setting-up-an-smsf/choose-individual-trustees-or-a-corporate-trustee
v https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/in-detail/smsf-resources/smsf-technical-funds/funds-starting-and-stopping-a-pension

Many of us have been experiencing unexpectedly cold temperatures and high rainfall lately, but the good news is that spring is on the way. As the days grow longer and warmer, there is a sense of optimism and renewal.

Market watchers, investors, and mortgage holders, who had been anxiously awaiting the release of the latest inflation data at the end of July, found themselves neither jumping for joy nor collapsing in despair.

The best that could be said about the figures was that they were not as bad as they could have been. At its meeting on the 5^th of August, the Reserve Bank Board announced it was leaving the cash rate at 4.35% despite a modest increase in inflation. The Australian Bureau of Statistics reports that prices rose 1% in the June quarter and 3.8% annually.

Retail sales continue to sputter along, with the latest data showing a 0.5% increase in June, thanks to seasonal sales. However, over the quarter, retail sales volumes fell by 0.3%, marking the sixth decline in the past seven quarters. Meanwhile, building approvals fell by 6.5% in June, following a 5.7% rise the previous month.

The ASX S&P 200 index finished the month strong, with an increase of around 4%, despite a mid-month plunge. However, the Australian Dollar didn’t fare as well, falling below 65 US cents for the first time in almost three months. In the US, the S&P 500 ended the month nearly where it began, after a significant mid-month spike and subsequent fall. For the year to date, it has recorded an increase of almost 15%.

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