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Budget 2018: living longer

The Government is introducing a series of new measures designed to help Australians keep a greater portion of their superannuation savings pie.

Insurance opt-in
Insurance within super may not be suitable for everyone, particularly young people and those with low balances. From 1 July 2019, insurance will be offered on an opt-in basis for members with low balances of less than $6,000; members under the age of 25; and members who have not received a contribution in 13 months and are inactive. The changes intend to protect low balances from being entirely eroded and reduce incidences of duplicate cover.

Reuniting lost super
The ATO will have the ability to reunite all inactive superannuation accounts where the balances are below $6,000 with the member’s active account as of 1 July 2019. This will benefit those with inactive low balance accounts, i.e., low-income earners, young members and seasonal workers.

Protecting your super
The Government is banning exit fees on all super accounts to enable Australians to consolidate their super accounts on a more affordable basis. Additionally, a three per cent annual cap on passive fees charged by super funds on accounts with balances below $6,000 will protect those with low balance accounts to grow and maintain their nest egg.

Avoiding unintentional cap breaches
From 1 July 2018, individuals whose income exceeds $263,157 and have multiple employers will be able to nominate that their wages from certain employers are not subject to the Superannuation Guarantee (SG). This will assist in avoiding unintentional breaches to the $25,000 annual concessional contributions cap due to multiple compulsory SG contributions.

Member limit increase
Self-managed super funds and small APRA funds will have the opportunity to increase the maximum number of allowable members from four to six as of 1 July 2019.

Integrity of personal deductible super contributions
From 1 July 2018, additional funding will be allocated to the ATO aimed at improving the integrity of processes for claiming personal superannuation contribution tax deductions. This will enable the ATO to develop a new compliance model and undertake additional compliance and debt collection activities.

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Managing risk in your SMSF

October 12, 2018

SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.

Consider the following risk management strategies:

Diversification
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.

Liquidity
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.