From 1 October 2021, rollovers into and out of a Self Managed Super Fund (SMSF) can only be processed via ‘SuperStream’.

What is ‘SuperStream’?

SuperStream is the electronic system used to transfer money and data to super funds. It is used to process employer contributions to APRA-regulated funds and for rollovers between super funds.

The move to include SMSFs in SuperStream rollovers is welcomed by many SMSF fund members who have experienced delays in receiving rollovers into a SMSF.  The SuperStream protocols require paying funds to process the rollover of a member’s benefit electronically and within three days of receiving a valid request.

Many SMSFs have mature members who are not anticipating receiving any further rollovers hence, they have paid little attention to the SuperStream requirements.  However, if members decide to wind up their SMSF and rollover into a retail fund, they will generally need to register for SuperStream before the SMSF can process the rollover.  SuperStream, however, can be activated at any time and can be expected to be established within days.

ASIC’s requirement for a SMSF’s investment strategy to outline an exit strategy may require SMSF trustees to consider SuperStream as part of their next regular investment strategy review.

What is required for an SMSF to be SuperStream ready?

Most professional administrators are SuperStream ready, and many have been using SuperStream to process rollovers for some time. Where a SMSF doesn’t use professional administration services they will need the following:

• An electronic service address (ESA) which is provided by most SMSF software platforms, administrators, tax agents and some third-party suppliers. The ATO provides a list of ESA suppliers on their website – ATO ESA providers.
• A unique bank account recorded with the ATO.
• A Unique Superannuation Identifier (USI) which is the fund’s Australian Business Number (ABN).

Processing a rollover

The paying fund has three days from receiving an actionable rollover request to process the payment. If the rollover request has incomplete information, the trustee of the paying fund must request the required information within three days.  Additional time may be allowed if the paying fund needs to sell down assets.

Whilst the prompt receipt of rollovers into SMSFs is welcomed, there may be many practical reasons why a SMSF is not able to action a request to rollover into another fund within the three day timeframe.  In the absence of professional administration, it is not always possible to accurately calculate a member’s entitlement within three days.  In addition, the sale of assets to make the cash payment may take longer than the time allowed.

Where one member is leaving because of a dispute with another member, further difficulties in meeting the required timeframes may occur.

Another requirement of the SuperStream system is that the trustee of the receiving fund must allocate the rollover to the member’s account within three days of receipt of the funds. For SMSFs without professional administration, a minute regarding the allocation may be required.

Conclusion

SMSFs expecting to receive member benefits rolled over from another fund will need to ensure they are registered for SuperStream prior to the member requesting the rollover. Likewise, registration will be required before a SMSF trustee can rollover a member benefit to another fund.

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.

Ho! Ho! Ho! Merry Christmas.

It’s that time of year again! The time for giving and celebrating with loved ones, but for many, it’s also when our mind slips into somewhat of a panic as we begin the task of planning for the Christmas period.

Many people find it challenging to find time amongst the rest of their daily activities. The Christmas period adds to this with the additional sorting of social activity, planning a break or holiday, sorting food for Christmas lunch, presents for the family, all whilst figuring out how to make it all happen financially. Stressed yet?

Christmas time is when you need to take the most care with budgeting and planning.  It can be easy to get caught up in the sales and hype and purchase items and goods that are not required or that are beyond our financial means. Combine this with the ease of access to online shopping (Black Friday sales anyone?) as well as the advent of buy now/pay later schemes and the new year may be spent up to the eyeballs in debt.

How do you best deal with all this pressure?

The key is prior planning.  Not all of us have been putting money aside through the year, so of course, everyone’s budget will be different. Here are some quick tips;

• Don’t fall for marketing. Too often, we pay too much or purchase something we don’t need. Plan out what you want and know the correct price. It’s amazing how many ‘sales’ are not actually sales at all, with prices that are usually available at another retailer throughout the year.
• Shopping for Christmas lunch has the same rules as for a normal shop. Know what you need in advance, pre-ordering goods in high demand can often be cheaper and ensures you aren’t disappointed come Christmas Eve. Don’t go to the shops hungry or you are bound to have a few more purchases than needed.
• Drop the pressure in buying presents. A heartfelt present will always beat the biggest present. Each person that gets a present from you is special and the gift can reflect that, but a budget is a budget, and a sensible choice of gift is required.

When it comes to budgets, think in buckets. This might be;

• Bucket 1 – Gifts – don’t forget some of the less obvious ones (teachers, Secret Santa, charities, etc.)
• Bucket 2 – Food and Drinks.
• Bucket 3 – Travel – at home or away? This can be a big factor in how much goes into other buckets.
• Bucket 4 – Social Events – work parties, parties with friends, they all have a cost.

I previously mentioned Buy Now/Pay Later and of course credit cards.  Some debt can be fine, but you need to know what you can afford.  Plan repayments accordingly to erase any debt incurred as quick as possible. Failure to do so can incur high interest rates.

Finally, the best tip is to write everything down and keep track of purchases made.

• Have a shopping list when you go to the supermarket.
• Write each person’s name to get a present and what to buy.
• Keep receipts (and make a copy). Sometimes presents can be double-ups or the wrong size and without the receipt, there is no proof of purchase for a refund.

Prior planning can help you to look forward to the festive period and enjoy the presence of those around you.  The New Year can be a period free from financial worry but it does take some planning to achieve.

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.

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.

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.

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.

Remember the heady days of 2019? They were pre-COVID with fewer restrictions on our movement and a greater ability to get together.

Reminiscing about those pre-COVID days took me back to a large group dinner at a restaurant in which 100 people came together to celebrate. It was a day of freedom, fun and frivolity. The drinks flowed, whether one drank water or wine, the food was plentiful, the jokes – some a little risqué, some corny – added to the convivial atmosphere.  Then came the bill, with a side order of complication.  While some had lived large, others had supped on salad. This large group, in various states of sobriety, needed to decide how to split the bill. The fair thing might be for each to pay for their own consumption but even that was complicated. Some couldn’t really afford to pay.

Now, you may wonder why people came to dinner if they couldn’t afford to pay but what if the restaurant was Scotty’s Famous Restaurant (aka our Federal Government) and the diners were taxpayers paying for government services via taxation. How does Scotty do it?

Each year, the ATO distils tax information from 14.7 million people into a profile of 100 Australian taxpayers.  It’s a nice way of making information more digestible by converting a percentage to real numbers.

So, let’s take a closer look at the merry 100 diners in Scotty’s Famous Restaurant. But, before we do, as with pre-COVID days, the numbers are from 2018/2019 because:

(a)  We can’t have 100 diners together in a restaurant anymore (at least, not in Victoria) and some state borders remain closed.

(b)  The bill is paid after the meal or, to put in in tax terms, we pay tax after the end of the financial year; and

(c)  Some people reach for their wallets a little slower than others, submitting their tax returns late.

As you can see from the illustration below, Scotty’s Famous Restaurant has drawn people from all over Australia.

The split of diners is fairly representative of the population split in Australia.

But, the number of diners at the table only represents bums on seats. It doesn’t tell us what each has paid or consumed. Some will pay more than others and Scotty’s Famous Restaurant isn’t just famous for its food. It’s famous for its payment method. High income earners pay more than low or no income earners. Why? Because our tax system is predicated on the same principle as our health system, the healthy subsidise the sick, and the high income earners subsidise the lower income earners.

So, how did our diners pay? Nine people paid 48% of the bill while 25 paid no tax.  Some felt that was unfair until the discussion at the table turned to the broader contribution each diner makes to society. Why should a nurse, a teacher, an ambulance driver or a police officer earn less than an engineer, architect or top footy player? 25 of our diners were happy to be earning income while out dining, ten of these operate a business in their own name, while the remaining 15 earn rental income (only 6 enjoy a rental profit).

Scotty knows that paying the bill can spoil a good dinner so he plans in advance and asks for money upfront. Eighty of our diners paid too much and received refunds, while 13 people didn’t pay enough and, not willing to do the dishes, they had to pay more. The remaining seven of our diners, we can call them Goldilocks, paid exactly the right amount.

So, who paid what exactly?  Nine of our diners paid 48% of the bill. Yes, that’s right. Ending the restaurant parable for a moment and returning to real life, 48% of income tax is paid by 9% of taxpayers. The next 31% of taxpayers paid 40% of all net tax while 25% of 14.7 million taxpayers paid no net tax.

We hope you enjoyed this visit to Scotty’s Famous Restaurant. While the restaurant itself is a fantasy, the numbers are a reality and perhaps remind us of the contributions we make, whether monetary or otherwise, are also investments both for our own future and the future strength of Scotty’s Famous Restaurant, aka the great fertile food and cultural bowl we know as Australia.

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.

Buying your first home is a dream many Australians think is out of reach and saving for a deposit in an increasing property market only deflates one’s saving momentum.

The bank of mum and dad or an unexpected inheritance from that great aunt can assist, however, it is not often a bankable deposit.

The federal government has a saving scheme that helps first homebuyers make every dollar saved work that little bit harder.

I guarantee that many of you reading this have never heard of the First Home Super Saver Scheme.

So why are so few Australians saving for their first home through the First Home Super Saver Scheme? It is complicated, let me explain.

What is the First Home Super Saver Scheme (FHSSS)?

It is an interesting savings option that allows savings to be deposited and withdrawn from your superannuation account.

The deposit earns a set rate of return of 3% above the 90-day Bank Bill rate (0.12% p.a. as of 29/10/2021).

Investment earnings are taxed internally within superannuation at a maximum of 15%.

The voluntary super contributions that can be made are:

• non-concessional contributions
• salary sacrifice contributions
• personal deductible contributions
• limited by annual contributions caps (learn more in our previous blog article).

What are the FHSSS contribution limits?

• Annual limit – $15,000 of voluntary contributions
• Total limit – $30,000 on all voluntary contributions (may increase to $50,000 once legislated).

What are the eligibility requirements?

The applicant must:

• be over 18 at the time the determination is requested
• have no previous FHSSS release authority
• have never previously owned an interest in Australian real property (with some exceptions involving financial hardship provisions)
• occupy or intend to occupy the property as soon as practicable
• intend to occupy the property for at least 6 of the first 12 months that it is practicable to occupy the property.

The property must:

• be located in Australia
• a real property
• capable of being occupied as a residence
• not a mobile home or houseboat.

What is the maximum release amount?

To sum it up, the FHSSS maximum release amount is:

• the total eligible contributions subject to the above limits, plus
• proportioned earnings (the set rate of return) on the voluntary contributions, less
• any applicable contributions tax.

To release the savings from super you need to apply to The Australian Tax Office (ATO) who will calculate the maximum amount that can be withdrawn upon a determination request.

A valid request must be made to the ATO within 14 days of entering a contract. If a release request is made first, you have 12 months to purchase a home and sign a contract. You must notify the ATO within 28 days of signing the contract.

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.

The family holiday can be a little daunting, yet exciting, and if not planned, costly.  By budgeting your holiday, you can keep control of your costs and still create great memories and experiences to last a lifetime.

Step 1 – Set a budget amount that can’t be exceeded

The reality is that there is no right or wrong number here, it comes down to what you can afford in your family’s annual household budget and any holiday can be great if planned out.

You may even find some additional funds, review your budget, see if there are any other savings you could make on discretionary items that could be directed towards the holiday instead (e.g. do you really need a daily coffee or takeaway this week or can you use this on the holiday instead?)

Step 2 – Initial Planning

The best way to do this is to plan as a family. Get everyone involved as this helps kids learn great life skills.

Consider what kind of holiday you might want to take and make a basic cost estimate to see what fits in the set budget e.g. an overseas trip won’t fit in a budget of $2000.

Identify the needs for your holiday (transport required, accommodation, food/drinks) vs wants (activities, experiences, souvenirs).  Don’t forget what you might need to arrange for whilst you are away such as pets, mail, gardens.

Discuss as a family and prioritise the wants. Everyone will be different and not everything will be able to be completed due to time or cost.  Make sure everyone gets a say in the activities. This could be a family walk, a beach trip, a fun park, day spa, the list is endless. Do some research of the places you are going to see, what is of interest, or talk to friends that have been there before.

Step 3 – Basic structure

Structure the holiday day by day accounting for time to travel and time to see things along the way.  Identify where accommodation, travel, and other costs will be spent daily.  Do a basic cost estimate and allow 10% extra for something missed. There are plenty of online tools to get estimates.  Challenge the kids to look up costs and complete a spreadsheet.

Are you close to your budget amount? If yes, we can move to a more detailed plan, otherwise, if you are over, some more thought may be required.  Are there other opportunities for saving such as the type of accommodation (self-contained to save on meals, one- or two-bedroom units or motel, caravan park stays), driving vs flying and hiring a vehicle or maybe a train trip, could you make some sandwiches for lunch to allow for meals out for dinner?

Step 4 – Details

Start identifying things to book in advance such as flights, accommodation and activity tickets.  There are plenty of savings to be made with a prior booking.  This should enable you to have a costed plan within +/- 5 to 10%.  If the budget is getting tight, research.

Research can help find some great ways for additional savings. Look for deals (e.g. stay 3 nights for the price of 2, breakfast included, kids eat free, “happy hours” for dining.) Does the time you are travelling matter as peak season/school holidays can raise costs dramatically.

Step 5 – Consider everything

Contingency – do you need it?  Think about if you were delayed by a day or more, can you afford it?  Doing riskier activities like skiing or bungy jumping?  Travel insurance is not for everyone but could be something you want to consider (and add in the budget) to cover potential issues.

Planning and taking a holiday together can be rewarding, creating family time whilst educating the family on money and time management.  Take time to listen to each other and when the time comes, given you have planned it out, financial stress should not be an issue leaving you more relaxed and able to enjoy the time away.  Most importantly have fun and capture memories to last a lifetime.

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.

The receipt of inheritance brings both financial and emotional considerations.  Financially, an inheritance will more often than not improve one’s financial position by allowing debt to be paid down or the wealth base to increase.  Emotionally, the loss of a loved one is never easy, or the responsibility of applying the inheritance to ensure a ‘legacy’ is left may become a real burden.

For Age Pension recipients, there are additional considerations.

Centrelink assessment of an interest in a deceased estate

An individual’s interest in a deceased estate is an assessable asset once it is received or can be received.

It can take considerable time to finalise an estate, it is accepted that a beneficiary is unable to receive their interest in a deceased estate for up to 12 months from the death of the testator.  However, if the estate is finalised earlier the interest will be assessed from the date it is received or able to be received.

If after 12 months of the death of the testator the estate has not been distributed, Centrelink may consider the facts of the case to determine what is preventing the estate from being finalised.  If a beneficiary has contributed to the delay, their interest will be regarded as being available.

If the beneficiary is not the executor and the executor has discretionary power on how the estate is distributed, Centrelink will accept that the beneficiary has no control over the delay.  Also, Centrelink will accept that where the estate debts are yet to be paid the estate interest cannot be received.

Deprivation provisions are intended to limit the potential for recipients to avoid the assets and income tests. They apply to a person’s interest in a deceased estate or superannuation fund if the person:

• Waives their right to their interest in the deceased estate or superannuation fund and the person obtains no, or inadequate consideration.
• Directs the executor of the estate or trustee of the superannuation fund to distribute their interest in the deceased estate or superannuation fund to a third party and the person obtains no consideration or inadequate consideration.
• Gives their interest in the deceased estate to a third party after the estate has been finalised for no or inadequate consideration, or
• Gifts their interest in a superannuation fund.

Once a person’s interest in a deceased estate is assessed, the value of this asset or the deemed income may reduce that person’s age pension entitlement, possibly to zero.

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.

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.

Financial advice is important at all stages of your life.  Whilst each generation has many differences, ultimately our financial goals will end the same, it’s just the timing of the priority.

When clients see a financial adviser and are asked why they are seeking financial advice, many new clients will focus on generating wealth or planning for retirement.  It’s key for the adviser to explore the client’s financial goals.  Only then can a plan be considered on how to achieve the client’s endpoint.  It’s worth understanding that we are all different, there is no right or wrong answer, and the priorities of our goals will vary over our lifetime.

The Financial Planning Association of Australia prepared a document in 2016 entitled “Dare to Dream” and a part of the survey considered achievements and goals across generations.  Notwithstanding the impacts of Covid-19 on travel and people’s work and health, much of the detail from 2016 remains apt today.

The report highlighted that whilst one in two Australians dreamt more about the future in 2016 compared to 2011, 63% had made “no plans” or “very loose plans” to practically achieve those dreams.

The survey considered the three main generations present in the workforce – Baby Boomers, Gen X and Gen Y.

Amazingly, when it came to identifying their “greatest achievement”, the top two answers provided for every generation were overseas travel and buying their first home.  Gen Y also listed a new home as their top dream, reflecting that many had yet to achieve this, but when they did it was seen as a significant achievement.  Gen X still had a first home as their number 4 dream, whereas Boomers had moved to see new furniture for their home (already in ownership) as a higher dream.

All generations would love to travel as a short and long term goal, but only Gen X / Y credited living overseas for a period as a significant achievement, reflecting the change in dynamic and the opening of world travel and opportunities through the past 20 to 30 years.  Travel is not always the highest of priorities for many clients but does feature highly in goals requiring a lump sum allocation and perhaps the need for household budgeting to accomplish.

The goal of long term planning for retirement was common across all generations and early retirement could be seen as a focus area for both Gen X and the Boomers.  Not surprisingly, all generations saw saving money, repaying debt and buying a new car as high priority short term goals.  Saving money and repaying debt are great short term goals when targeting retirement wealth and early retirement.

Ultimately, the report highlighted that the goals for all 3 generations are largely the same, it’s just the priority we allocate to them at each stage of our life that is different.  When considering your goals, make sure you target what is both important and realistic for you – your financial adviser is there to help you on your way.

Source: FPA, “Dare to Dream”, 2016.

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.