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Managing risk in your SMSF

Posted on October 12, 2018 by admin


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: DiversificationDiversification 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. LiquidityIf 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.


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Choosing the right super risk profile

Posted on October 5, 2018 by admin


Choosing the right super risk profile at the right time can drastically increase your retirement savings. The following considerations will help you invest wisely when it comes to building your retirement nest egg. Types of investment optionsYour super fund should offer a range of investment options to consider. Here is what to know about each kind of option: Aggressive options are high risk, and you may have to sustain significant losses hoping to maximise your return in the long-term Growth options aiming for higher returns over longer terms may sustain some losses in poorly performing markets Balanced options provide moderate growth but endure less damage with an economic downturn Conservative options provide a lower return but are the lowest risk option Picking the right optionThe investment option right for you depends on your retirement goals, your financial circumstances and your attitude towards risk. Your timeframe for investment should be substantial if you are looking at high-risk options as you have a considerable opportunity to recover from any losses. As your income stabilises and your retirement comes closer consider shifting to a low-risk alternative to secure what you have built up. You may also want to look to your assets like […]


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3 easy ways to maximise your super

Posted on September 27, 2018 by admin


Superannuation is more critical than it has ever been. If having an ageing population has taught us anything, it is how managing money now can have substantial ramifications for your retirement plan. Merge your superEvery super account you have comes with a set of fees. It is worth your while chasing down inactive accounts and putting all your super into the one account to reduce fees and maximise the investment benefits. Salary sacrificeIf you can budget putting more of your salary away into a super account every month, you can reap multiple rewards. First, you can use the extra super payments to offset your pre-tax payments up to the current concessional contribution cap of $30,000 per year and after-tax contributions of $180,000. You can also build up your super while you can afford to. StrategiseYour investment strategy should depend on the amount of risk you are willing to take. This will vary on where you are in your career. A growth investment option, which is high risk, might suit you if you are in the early stages of your career development. However, as your income stabilises to your goal amount, it might be wise to change super funds to a […]


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Paying super to different visas

Posted on September 24, 2018 by admin


Normally employers have to pay a worker super. However, this becomes confusing with the different visas that employees might be on. Some rules are listed below. Paying super to temporary residentsTemporary residents working in Australia are eligible for super guarantee. When temporary residents leave Australia, they can claim the super paid as a departing Australia superannuation payment (DASP). This is provided that they meet the requirements where you must: Be 18 years old or over (if you are under 18 you must meet the above conditions and work over 30 hours per week to be entitled to SG) and, Paid $450 or more before tax in a month. Employees working overseasAn employee sent to work overseas must be paid superannuation by their employer. The other country may require the employer or employee to pay super there as well if Australia does not have a bilateral agreement with that country. To gain exemption from the super payment in the other country, the employer needs to show the authorities in the other country a certificate of coverage gained from the ATO. Employees not eligible for super Non-resident employees, you pay for work they do outside Australia Some foreign executives who hold certain […]


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Employer super obligations reminder

Posted on September 14, 2018 by admin


The Australian Tax Office (ATO) is reminding employers to check they are meeting their obligations when it comes to paying super to their workers. To help you make sure you are meeting your requirements, consider this checklist: Are you paying the correct amount? You are required to pay a minimum of 9.5 per cent of their ordinary time earnings to their superannuation fund. Are you keeping correct and up-to-date records? It is important to maintain accurate record-keeping procedures, so you have evidence to prove you have been meeting your employer super obligations. Are you paying super to all eligible workers? Like your employees, some contractors you hire may also be eligible for super contributions. Are you making payments to the right fund? Unless a worker has not provided their details, you should be paying into their fund of choice instead of your default fund. Are you making payments on time? The ATO allows employers to make contributions quarterly. Always ensure you make payments on time as late payments can incur a superannuation guarantee charge, which is not tax deductible. When making payments on time, they are tax deductible against your business income. Are you paying the right way? It is […]


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Winding up a SMSF

Posted on September 6, 2018 by admin


The Tax Office is reminding individuals winding up a self-managed super fund (SMSF) that before lodging your final SMSF annual return, you must first have an audit completed by an approved SMSF auditor. When lodging your SMSF annual return, answer Question 9 in Section A: ‘Was the fund wound up during the income year?’. You should also look to complete Question M in Section D: Supervisory levy adjustment for wound up funds. By doing so, you will reduce the SMSF supervisory levy you must pay, so you do not have to pay the levy the following year. Remember also to pay any outstanding tax liabilities and lodge any outstanding returns. Otherwise, you may be subjected to compliance assessments and risk penalties. The Tax Office will send you a letter of confirmation of your wound up fund, which will include: – confirmation your SMSF’s ABN is cancelled, and – your SMSF’s record is closed on the ATO’s system. Avoid closing your bank accounts until all expected final liabilities have been settled and requested refunds received. You can pay outstanding tax liabilities, including the supervisory levy when you lodge your final SMSF annual return.


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What is exempt current pension income?

Posted on August 29, 2018 by admin


Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI). This form of income does not include assessable contributions or non-arm’s length income. Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase. There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method. Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.


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Avoid being short changed with your super

Posted on August 22, 2018 by admin


With recent regulatory changes to super contributions, it is easier than ever to ensure your employer is paying you the super you are entitled to. There are specific steps you can take to ensure you are being paid correctly. Consider the following: Understand your entitlements Employers have to put 9.5 per cent of an employee’s wage into their superannuation account. As of July 2017, these contributions must be made quarterly through the super clearing house. This was introduced by the ATO to prevent dishonest employers from ripping off their employees. If you have not received a quarterly payment by the 28th of the following month, contact the ATO, and they will investigate this on your behalf. Consolidate your accounts If you have had various jobs throughout your working life, there is a good chance you have more than one super account. If you do, you will be paying excess account fees. You should look to roll over your funds into one account and close the leftover accounts. Research It is advantageous to do your research and be informed regarding your super. This will guarantee you a fund that will provide you with the financial security you deserve when it comes […]


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Super contribution caps: the basics

Posted on August 21, 2018 by admin


Making contributions to your superannuation fund is a great way to grow your nest egg, however, there are caps on the amount you can contribute every financial year to be taxed at lower rates. Once you go over these caps, you may be required to pay additional tax. The cap and extra tax amount will vary depending on your age, the financial year the contributions relate to, and whether the contributions are concessional (before tax) or non-concessional (after tax). Concessional contributions Concessional contributions include compulsory employer contributions and salary sacrifice amounts. There is a cap on the amount you can make, and payments are taxed at 15 per cent. Non-concessional contributions These are after-tax income contributions and are not taxed in your super fund. However, like concessional contributions, caps also apply to non-concessional payments. From 1 July 2017, the cap was reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years providing they meet the work test. The cap is indexed in line with the concessional contributions cap. The non-concessional cap is also nil for a financial year if you have a total super balance greater than or equal to the […]


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Protect yourself from early super release scams

Posted on August 7, 2018 by admin


When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme. Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super. You can only access your super when you meet a condition of release. Generally, when you: – Are 65 years old (even if you have not yet retired). – Reach your preservation age and retire. – Reach your preservation age and begin a transition to retirement income stream while still working. There are special circumstances where you may be able to access your super early. These special circumstances include: – Severe financial hardship – Temporary or permanent incapacity – Compassionate grounds – Temporary residents leaving Australia – Super death benefits (inheriting super) – Super less than $200 – Terminal medical condition To avoid falling for an illegal early super release scam, be wary if the promoter: – charges high fees and commissions; – requests identity documents; – claims you can […]


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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.