Skip to main content Skip to search

Archives for Cheng Qian

Man holding superannuation savings

SMSF – six member funds

The pros and cons of a six-member SMSF have been extensively discussed in the financial services industry. One thing we know for sure is that a six-member fund is not for everyone. The majority (more than 93%) of SMSFs in the industry are either single-member SMSFs or two-member SMSFs.

Below are some pros and cons of having a six-member SMSF:


  • You can have more money (greater purchasing power). This will allow for greater diversification of assets or investment in higher-value assets.
  • This could allow your children to invest their super in more substantial investments and achieve economy of scale, especially when their super balance is low.
  • Having more members in your super fund will also reduce the cost of managing your family members’ super, i.e., a new SMSF setup cost, ATO levies and other costs, as the fees are spread across more members.
  • If your children make regular super contributions, it will be easier to make your pension payments.
  • The taxation strategies may be implemented more efficiently.
  • Easier to meet Australian Super Fund residence requirements when/if you or your children travel overseas for an extended period of time.

The drawbacks include:

  • Lifestyle considerations. Two sets of investment strategies may be required. However, differing investment timelines between the parents and kids may not be a major issue if all members agree on a range of diversified assets.
  • Disputes and conflicts between members can make the decision-making and fund administration difficult. Who does what and the rules about the fund’s operation will need to be decided and documented in advance.  The SMSF’s Trust Deed will need to be reviewed and updated to cater to the increase in member numbers.
  • Voting rights can be necessary within a six-member SMSF.  The children may outvote their parents, especially when one parent gets old and becomes incapacitated.  Having voting rights based on each member’s balances or any other method may need to be considered.
  • Excessive transparency of the parents’ superannuation balances could cause potential financial abuse.
  • Possible death benefit disputes. Succession planning and future control of an SMSF become more important with more member SMSFs.
  • The forced sale of assets. The SMSF may be required to sell assets to allow for superannuation splitting. Sound planning may be required for situations where children need to move their super benefits to another super fund.

If you are thinking of getting your children into your super fund, a thorough review of your family situation and specialized personal advice are required. Get in contact with our experienced team of advisers so we can help you identify a superannuation strategy that works for you and your retirement goals.

Reference – this article is written in conjunction with Monica Wang @ Moneta Super

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Person typing on laptop

Quotes to embrace during volatile markets

2022 has been a volatile year for financial markets, with inflation at all-time highs and central banks around the world attempting to play catch-up via steep interest rate hikes. Global supply chain constraints, exacerbated by the war in Ukraine and lockdowns in China have led to fear of a potential recession.

Australian markets have performed better than global counterparts, yet unfortunately, nothing has been safe (except cash). Global markets are down 10-20 percent for the year, bond markets have crashed 10 percent and the ASX is down nearly 10 percent as well. Property prices have also begun to stagnate, especially in the capital cities as the rising cost of borrowing puts a stop to the post- covid property boom.

Investors need to realise that corrections are normal and are part of a healthy market. A steep pullback in the market may provide opportunities to buy good quality companies at a lower price. This makes it even more important to turn down the noise, remain disciplined and stick to a long-term investment strategy. The following quotes should be kept top of mind when investing during volatile market conditions.

ASX 200 performance

*ASX 200 performance over last 12 months to 11/07/2022

1. “The stock market has predicted 9 of the past 5 recessions.” – Paul Samuelson

It does not mean much knowing or expecting an incoming recession as you will always be better off if you remain invested and more importantly, continue to invest during downturns.

2. “Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” – Peter Lynch

The only way to guarantee a loss is to sell during a correction and crystalising paper losses.

3. “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” – Benjamin Graham

Markets are impossible to predict in the short term, however, quality companies will continue to perform in the long term.

4. “More money has been lost trying to anticipate and protect from corrections than actually in them.” – Peter Lynch

History has shown that corrections are nothing more than a temporary reset for the market if you remain invested.

5. “Be fearful when others are greedy and be greedy when others are fearful.” – Warren Buffett

The Oracle of Omaha (Warren Buffett) has outlined the importance of avoiding herd mentality. Do not buy during market peaks and add to your positions during steep downturns.

If you need assistance with your long-term investment plan, please reach out to your financial adviser.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Pension halving legislation

Pension halving legislation – 4th consecutive year

The Australian Government has announced that the pension halving legislation originally announced on 1 July 2019 will continue for a further 12 months. It is now scheduled to finish on 30 June 2023. The announcement has come as a shock to many people within the industry as it was originally introduced to help retirees cope with market volatility throughout the COVID-19 pandemic. Now the markets have recovered to near all-time highs.

Pension halving legislation

The original legislation states “the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% for the 2019–20, 2020–21, 2021–22 and 2022-23 financial years.” This minimum pension is calculated as at 1 July each financial year and is calculated as a percentage of the pension balance. This is the minimum pension that must be paid to beneficiaries for the fund to remain compliant.

An example of this would be a 65 year old retiree with a superannuation fund in drawdown/pension mode valued at $700,000. Under normal circumstances, the minimum pension drawdown would be $35,000 (5%). With the pension halving legislation in place, this same individual would only be required to draw $17,500 (2.5%).


The major benefit to the pension halving continuation is it allows retirees to preserve their super balance which serves as a tax haven. All income from investments and capital gains that are made within this environment are tax free.

Not being required to crystallise losses in volatile market conditions. Although the markets have recovered from the COVID-19 sell off, there is still a lot of volatility in the markets today with inflationary concerns and continuing geopolitical issues in Europe.

Key takeaways

  • Pension halving is not mandatory. Individuals will need to review their situation and assess if pension halving will be of benefit.
  • This legislation will apply to account based, transition to retirement and term allocated pensions.

If you would like to take advantage of this legislation, please reach out to your Financial Adviser.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Downsizing and moving boxes

Are you looking to downsize?

Whether it’s a financial or lifestyle decision, downsizing your home once the kids have flown the nest is a common occurrence for many Australians. Selling the family home is a great way to unlock equity and help fund the next phase of your life. However, completing the sale and purchasing a new property is only one part of the problem. The next step can be just as tricky, as you need to identify the best way to get any excess cash generating a return into your superannuation.

Making voluntary contributions

For people aged under 67, the easiest way to contribute to super is by using the member contributions cap. Each year you are eligible to contribute $27,500 of pre-tax money (concessional contribution) and a further $110,000 of post-tax non-concessional contributions. If you are wanting to make concessional contributions, it is important to claim these on your tax return as an income tax deduction.

For people aged between 67 and 74, they will need to satisfy the work test before being able to make voluntary super contributions.  What is the work test and how can we ensure it is met? For the work test to be met you must be gainfully employed for at least 40 hours during a consecutive 30 day period in the financial year in which the contributions are made. If you are currently employed while you are looking to downsize, then meeting the work test is not a task that you will need to complete and you will have the ability to contribute to your super.

Downsizer contribution

For those aged 67 and older, the downsizer contribution scheme could be the best way to funnel the released equity from downsizing the family home into the superannuation environment. The downsizer contribution allows individuals to contribute the direct proceeds of downsizing into superannuation of up to $300,000 and $600,000 for couples. This contribution is treated as a post-tax non-concessional contribution and will not affect your contribution caps. To be eligible to make a downsizer contribution, the following criteria must be met;

  • The individual is aged 65 or older.
  • The property was owned for at least 10 years and must have qualified as your primary residence at some point during that period (making it wholly or partially CGT exempt).
  • The contribution is made to the superfund within 90 days of receiving the proceeds of the sale (This is usually the settlement date).
  • You provide the superfund administrator with the required NAT75073 form before or at the same time as making the contribution.
  • You have not previously made a downsizer contribution (This is a once in a lifetime opportunity and cannot be repeated).
  • The property being sold is in Australia and is not a caravan, houseboat or other mobile home.

Using this once in a lifetime downsizer contribution gives retirees the ability to contribute one last time into Super which holds significant advantages over investing the funds outside super or holding the equity in cash.

  • Income is taxed concessionally at 15% within the superannuation environment.
  • Upon meeting retirement conditions, the entire balance of your super may be tax-free in terms of both income and ongoing drawdowns.
  • Upon meeting retirement conditions, unrealised capital gains could be waived.
  • It does not affect your contribution caps/limits.
  • Once invested, the funds will generally produce a higher return than holding cash.

If you wish to seek advice around downsizing options, please reach out to one of our Financial Advisers.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Notebook with financial plans

Top 5 investment mistakes to avoid in your 30’s

It is important to start building wealth through investing early to make the most of compounding returns. Below are some common mistakes to avoid in your 30s to ensure success in reaching your financial aspirations.

Racking up debt

A great way to sabotage your own efforts toward building financial security is to be carrying a lot of debt, especially those from credit cards and personal loans. After all, the stock market’s average annual return over long periods is close to 10%, which is great, but many credit cards are charging 16%, 20%, or even 25% or more annually. Even if you invest regularly, holding excessive debt may result in you going backwards with your financial goals.

Not having an emergency fund

Not having an emergency fund is an emergency in itself. It is easy to assume you won’t lose your job, face costly medical bills, or need unexpected repairs on your car, but these things happen to people all the time – often out of the blue. Aim to have at least several months of living expenses in an accessible account, so you are prepared for any expensive curveballs life throws at you. Furthermore, ensure sufficient risk management provisions are in place such as life, car and health insurance. This will cushion the one off expense if the worst was to happen.

Not living below your means

It is smart to develop good habits early in life, and one of them is living below your means. That means spending less than you earn. It sounds simple, however, in practice, many fall into the trap of purchasing a bigger house or fancier car than what is realistically and practically required. Staying within your means ensures that you do not rack up on unnecessary debt and will be able to save and invest your ongoing cash flow surplus.

Taking on too much risk

Investing in stocks is a powerful long-term strategy, but do not just invest in any stocks at any price. Do not fall for the hype around penny stocks and don’t chase growth stocks at high prices. It is important to ascertain your own risk appetite before investing to avoid emotions taking over. If stock picking is out of your realm of expertise, seek assistance from a financial adviser.

Not having a plan

Finally, here is a big blunder that too many people make, not having a plan. It is great to be saving and investing, but are you saving and investing enough, too little or too much? How much more should you be aiming to invest in the coming years? How much money do you need to retire? Do you want to try to retire early? If so, how will you achieve that goal?

Take some time to create a plan, and do not be afraid to consult one of our experienced financial advisers.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Considerations when planning your retirement

Considerations when planning your retirement

Retirement is something that most people look forward to but not everyone plans and prepares for. Often it is not good enough to be emotionally ready to retire but it is crucial to ensure that you are financially ready too. Before you walk away from a career that you have been immersed in for years and run off into the sunset, it is important to consider your goals and objectives.

  • Do you still enjoy work and how much longer can you go on for?
  • Do your retirement goals fall in line with your partner?
  • How is your physical and mental health?
  • Do you have a healthy financial situation (dependants and debts)?

If you can tick all these boxes then you should be ready to plan for retirement. Key areas to consider include;

  1. How much money will you need? If you run a household budget, consider how that is likely to change when you retire.
  2. What lifestyle aspirations do you have for retirement? You may wish to partake in international holidays once each year or caravan around Australia. Factoring in your lifestyle goals will help answer the question of whether you have enough.
  3. What legacy aspirations do you have? Some may be comfortable for the kids to receive whatever is left, others may have a preference of leaving something behind as part of their legacy or even providing assistance in the near future.

The Australian Financial Security Authority (AFSA) has deemed the following incomes as adequate for a ‘comfortable’ or a ‘modest’ lifestyle in retirement.

AFSA's retirment statistics

As part of your retirement plan, it is also important to be mindful of common risks as you approach or enter retirement.

  • Sequencing risk – this is the risk of the market facing a severe and unexpected downturn just before you retire. As a pre-retiree, you may not have the time horizon to wait out a recovery. An example would be a retirement nest egg of $1,000,000 falling to $750,000 just as you are about to retire. At a drawdown of 5%, this is a reduction of annual income from $50,000 pa to $37,500 pa and a big hit to anyone’s retirement.
  • Lower than expected returns – retirement portfolios are not designed to shoot the lights out but to generate a sustainable level of return with a focus on capital preservation. However, if returns do not stack up for whatever reason, it will lead to a rapid deterioration of your capital and your retirement savings may not last as long as you designed them to.
  • Longevity risk – this is the risk of retirees living beyond their retirement savings. With improved health care and higher standards of living, life expectancy is higher than ever. Hence, with all else equal, you are more likely to outlive your retirement savings.

If you wish to seek assistance on your retirement plan, please reach out to one of our friendly financial advisers.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Quotes to remember during market highs

Quotes to remember during market highs

Regardless of the short-term issues on the resurgence of COVID-19 driven by the Delta variant, lockdowns and restrictions, fully utilised monetary and fiscal policies alongside high inflation, the Australian and Global markets are at all-time highs. The current investment climate overloads investors with an excessive amount of information on traditional assets such as shares and property alongside speculative favourites such as GameStop and Bitcoins. It is easy to lose sight of the fundamentals of investing and below are quotes from the great investors of our generation to keep us in check.

“Never invest in a business you can’t understand.” – Warren Buffett

Many lost a fortune through the Global Financial Crisis (GFC) in investments that were not easy to understand and involved excessive complexity. While there’s likely something in blockchain and digital finance, the same caution applies to cryptocurrencies.

“More money has been lost trying to anticipate and protect from corrections than actually in them.” – Peter Lynch

Preserving capital is important. However, timing the market during and after a correction leads to investor’s becoming so focused on avoiding losses that they miss the initial positive market recovery. We have seen a bit of that ever since share markets bottomed in March 2020, with numerous forecasts for steep falls ever since and yet markets have fallen a few per cent every so often only to resume their rising trend.

“To be an investor you must be a believer in a better tomorrow.” – Benjamin Graham

If you don’t believe the bank will look after your term deposits, that most borrowers will pay back their debts, that most companies will see rising profits over time as the economy grows, that properties will earn rents, etc (and that the world will learn to shake off or live relatively safely with coronavirus) then there is no point investing. This is flippant but true – to be a successful investor you need a favourable view of the future.

“There is no free lunch.” – Anon

If an investment looks too good to be true, it probably is. Focus on investments offering sustainable cash flows (dividends, rents, interest) that don’t rely on excessive gearing or financial engineering.

If you are ever in doubt in the face of volatile market conditions, please contact one of our friendly financial advisers.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Person handing over contract for deceased estate

Taxation & Deceased Estates

When a person dies, generally the responsibility for administering the deceased estate falls to the legal personal representative. This person may be an executor or administrator who has been granted a court’s probate or letters of administration. It is important to note that while there are no inheritance or estate taxes in Australia, the legal personal representative is likely to have important tax and superannuation issues to attend to.

It is important to notify the ATO and the deceased person’s super fund of the death as early as possible. The ATO will determine whether a tax return is required for the deceased person and the super fund will commence a process for the release of any superannuation entitlement. A formal death certificate will be required to fulfil an official notification of death.

Accessing information from a deceased person can sometimes be tricky. You’ll need to have probate granted or a letter of administration. In the past, tax agents, BAS agents or legal practitioners engaged by a legal personal representative were unable to access this information directly. However, effective from 15 May 2020, the legislation has been modified to allow information from a deceased person to be provided to these agents directly, given the complications associated with the tax affairs of deceased estates. A deceased estate data package will also be provided by the ATO, which includes;

  • Individual tax return information for the last three income years.
  • An extract of income and investment data for the last three income years.
  • An extract of notices of assessment issued for the last three income years.
  • Copy of the most recent statement of account.
  • Any outstanding ATO debts.
  • Any superannuation accounts identified.
  • Payroll data received for the current year.

From here, an assessment is made as to whether an individual tax return or trust tax return is required for the deceased person and their estate. All outstanding tax implications involving employment income, investment earnings and superannuation distributions will be assessed and any tax payable or refunds are applied to the deceased’s assets.

As a beneficiary of a deceased estate, there may be some tax obligations depending on the following factors;

  1. Receiving super benefits – if the deceased person had super, the super fund’s trustee will work out who to pay the benefit to and how it will be paid (lump sum or income stream). If a Binding Death Nomination is in Place, the superannuation trustee will follow those instructions. Whether tax is payable depends on whether the beneficiary is a dependant under taxation law, whether it is paid as a lump sum or income stream, the breakdown of the tax-free and taxable components of the fund, the ages of the beneficiaries and the age of the member when they died. For most funds, there will be some tax payable unless you are a spouse or financial dependant of the deceased.
  2. Receiving investment assets – Capital Gains Tax (CGT) will apply to the disposal of an asset, however, if you receive an asset, you will not be affected by CGT. If you later sell that asset, CGT may apply.
  3. Receiving/earning income – income is deemed assessable from the date of entitlement rather than the date of payment. Beneficiaries need to be conscious of reporting such income in the year of entitlement.

There is no one size fits all approach regarding deceased estates and it is usually a long-drawn process. It is highly recommended that you engage the accountant or financial adviser of the deceased and employ a legal practitioner to assist with the process.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Elderly couple watching sunset

Temporary minimum pension drawdown relief

Government support comes in all shapes and sizes and the temporary minimum pension drawdown relief was one key measure designed to support retirees at the onset of COVID-19. Superannuation pensions and annuities are subject to rules that determine the minimum and maximum amounts to be paid in a financial year. The legislation allowed superannuation accounts that are currently in drawdown/pension mode to effectively halve their annual drawdown limits and preserve superannuation balances during the COVID-19 market sell-offs.

These rules were initially legislated for the 2019/20 and 2020/21 Financial Year’s (FY):

Referencing the above table, a retiree aged between 65-74 would normally need to draw a 5% minimum amount per annum from their pension accounts. The drawdown relief legislation allows this individual to draw only 2.5%. This preserves the superannuation balance and avoids the need to sell down investments during the height of the market sell-offs.

An example would be a retiree aged 65 with an $800,000 pension balance. Under normal circumstances, 5% must be drawn per annum, which is $40,000. However, with the drawdown relief in place, only 2.5% is required to meet the annual legislated drawdown requirements, which is $20,000.

Benefits of this temporary measure to retirees

  • Preservation of superannuation balance (tax-free nest egg).
  • Avoids crystallising losses (from the volatile COVID-19 sell-offs).
  • Flexibility on where to draw income (access taxable sources before superannuation).

On Saturday 29 May 2021, the government announced that a further extension to this measure is being considered for the 2021/22 FY.

The proposed minimum pension drawdown for 2021/22 FY:

Key takeaways from the May announcement

  • This proposal is not yet law and still needs to be tabled.
  • This measure is not compulsory. Individuals need to review their situation to assess whether the pension halving/reduction will benefit their unique circumstances.
  • The measure will apply to account-based, transition to retirement and term allocated superannuation pensions.

Please keep in mind that there are no guarantees that the temporary minimum pension drawdown relief will be extended into the 2021/22 FY. This is something that we are keeping a close eye on for the benefit of our clients.

If this is something you’d like to take advantage of, please reach out to your Financial Adviser.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Read more
Bitcoin is a volatile investment

The Crypto Craze

2020 was a rollercoaster ride for investors, as we experienced the most volatile stock market in decades. However, the 30-40% dip experienced by ASX investors in a mere matter of weeks is nothing in comparison to cryptocurrency investors and Bitcoin fanatics who can experience this on a daily basis. Bitcoin has been all over the news recently as it has surpassed the psychologically important level of US$50,000 per coin on the back of Tesla’s $1.5 billion investment. This leaves the question, what exactly is a Bitcoin and can we view it as a valid investment?

What is Bitcoin

Attempting an analogy to explain Bitcoin is no easy task as there is nothing quite like it. Even the best comparisons out there will be imperfect.

Bitcoin is a virtual currency created in 2009 as an alternative to government issued ‘medium of exchange’, which most of us know as physical money. It is designed to hold a similar function as a ‘store of value’ with the closest comparison being gold, this is why many refer to Bitcoin as ‘Digital Gold’. The major difference between Bitcoin, gold and cash is that you cannot hold onto a Bitcoin and you definitely cannot fashion it into a piece of jewellery, it only exists on an electric file. Transactions for Bitcoins are recorded and distributed via a decentralised ledger, which removes the need for government control in the regulation of money supply, and hence Bitcoin is referenced as ‘Decentralised Money.’

Is Bitcoin money?

There are generally three functions of money:

  • Money is a store of value: Consider it as a means of saving and allocation of capital. The issue with physical money is that inflation will erode the associated purchasing power over time.
  • Money is a unit of account: This allows it to measure value in transactions and facilitates a means of exchange. All financial terms around profits, losses, income, expenses, debt and wealth can be measured against money.
  • Money as a means of exchange: Put simply, you can buy things with it and it will be accepted almost anywhere and everywhere. Grocery shopping, buying a home or even lending services are all applicable with a universal understanding and acceptance of money.

Bitcoin has been surging in popularity; however, it is nowhere near being universally accepted as a unit of account or a means of payment. In light of recent events, some countries have even gone so far as to ban it entirely. Quoting billionaire Mark Cuban “Bitcoin would have to be so easy to use it’s a no-brainer. It would have to be completely friction-free and understandable by everybody first. So easy, in fact, that grandma could do it.”

Is Bitcoin like gold?

The common theme around Bitcoin and gold is that they are both speculative in terms of their valuations and are both viewed as a hedge to conventional monies such as the USD. The main reason Bitcoin is more closely aligned to gold as opposed to shares is that cash flow, revenue, earnings, interest payments or dividends do not determine the prices of these instruments. They are only worth as much as people are willing to pay for them as an alternative asset and as a ‘store of value’.

Bitcoin specifics

  • Bitcoin is a cryptocurrency; however, it is only one of the many thousands of cryptocurrencies available on the digital market.
  • A cryptocurrency is held electronically and can be used to buy goods and services online.
  • Cryptocurrencies are powered by Blockchain, which is a decentralised technology that manages and records transactions spread across many computers.
  • Bitcoin is not dependant on central banks or governments in control of the money supply. It also does not flow through the traditional banking system.

To put it simply, regular people like you and I can contribute to the record-keeping of Bitcoin transactions via our private computers, however in reality, it is not that simple. The key takeaway is that Bitcoin is decentralised which removes the need for central banks (such as the Reserve Bank of Australia) and retail banks (such as our Big 4, CBA, WBC, ANZ & NAB). For those with little faith in government regulation and a heavy distrust in our banking system, this is Bitcoins greatest appeal yet this same definition around unregulated monies is also why so many stay far away from the digital asset.

In summary, we are not able to conclude whether Bitcoin can be viewed as a valid investment. It is somewhat similar to money, somewhat similar to gold and the price volatility of late bears similarity to an extremely volatile stock market. What we can agree on is that the digital asset cannot be ignored, with over $1.5 Trillion in cryptocurrency assets, it will be interesting to see if Bitcoin is still around at the end of the decade.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. Bitcoin is not on The Investment Collective’s Approved Products List and will not form part of any client portfolios. If you would like more tailored advice, please contact us today.

Read more