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Self-managed super funds (SMSF) aren’t just about financial investment

Posted on December 3, 2020 by admin


Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees. Firstly, SMSFs require a lot of on-going investment of time: Aside from the initial set-up, members need to continually research potential investments. It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF. The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par. Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying. Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review […]


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What record-keeping requirements does the ATO have in place?

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Record-keeping, if done well, can help running a business much easier. It gives you an overview of the business’ financial progress so that owners can assess their strengths and weaknesses and make decisions accordingly. Record keeping also enables owners to meet their tax and superannuation obligations easily – all the data and information required is readily available. Finally, record-keeping provides owners with a profile, of sorts, which demonstrates the financial position of the business to banks or other lenders. Record-keeping requirements related to tax and superannuation need to be met. The specifics will depend on the unique tax and superannuation and obligations your business may have and the structure of your business (sole trader, partnership, company or trust). The Australian Taxation Office (ATO), requires the following from all businesses: The records cannot be changed and further, the information should be kept so that it cannot be changed or damaged. The records must be kept for 5 years from the date they were prepared, obtained or a transaction was completed – or the latest act they relate to. The records might need to be kept for longer periods in certain circumstances. The business must be able to show the ATO their […]


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Transition to retirement

Posted on November 25, 2020 by admin


The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work. You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time. Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer’s compulsory contributions as well as any voluntary contributions you may be making. Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer. Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes. TTR can help ease your mind as you transition into retirement but it […]


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Tax contributions on your super

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How much tax you pay on your super contributions and withdrawals depends on a variety of factors. The process takes into account your total super amount, your age, and the type of contribution or withdrawal you make. How are super contributions taxed? The money that you contribute to your super account through your employer is taxed at 15%, and this is the same with salary sacrificed contributions. But there are exceptions to this: If you earn $37,000 or less, then the tax will be paid back to the super account due to the low-income super tax offset (LISTO) If your income and super contributions add up to more than $250,000, then you are also required to pay an additional 15% Division 293 tax. Any after-tax super contributions (non-concessional contributions) are not taxed further. How are super withdrawals taxed? How much tax you pay on withdrawals depends on whether you withdraw as a super income stream or a lump sum. Since this can be a convoluted process, it may be beneficial to approach an advisor and clarify any questions you may have before you withdraw money. What about beneficiaries? If someone dies, then their super money will go to their beneficiary. […]


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Superfund categories and what they mean

Posted on November 19, 2020 by admin


There are four different categories of super funds. These have different primary features and are more applicable to certain people than they are to others. Retail super funds Anyone can join retail funds. They are mostly run by banks and investment companies: Allow for a wide range of investment options. Financial advisors may recommend this type of fund as they receive commissions or might get paid fees for them. Although they usually range from medium to high cost, there may be low-cost alternatives. The companies that own these funds will aim to keep some of the profit they yield Industry super funds Anyone can join bigger industry funds, but smaller ones may only be open to people in certain industries i.e. health. Most are accumulation funds but some older ones may have defined benefit members Range from low to medium cost Not-for-profit, so all profits are put back into the fund Public sector super funds Only available for government employees Employers contribute more than the 9.5% minimum Modest range of investment choices Newer members are usually in an accumulation fund, but many of the long-term members have defined benefits Low fees Profits are put back into the fund Corporate super […]


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Small business CGT concessions

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Businesses receive four different types of concessions on top of CGT exemptions and rollovers which are available to everyone. These allow businesses to disregard or defer some or all of the capital gains from an active asset which is used in the business. The four additional concessions include: 15-year exemption: If the business has owned an asset for 15 consecutive years and you are 55 years or over and are retiring or permanently incapacitated, then the capital gain won’t be assessable when you sell the asset. 50% active asset reduction: Being a small business, ATO permits reduction of the capital gain on an active asset by 50%. This is in addition to the 50% CGT discount if ownership of the asset extends over a year. Retirement exemption: Capital gains incurred from the sale of active assets are exempt up to a lifetime limit of $500,000. However, you must pay the exempt amount into an appropriate super fund or retirement savings account if you are under 55 years of age. Rollover: You may defer all or part of a capital gain for two years upon selling an active asset. Your deferral period can be longer than two years if you acquire […]


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What is an annuity?

Posted on November 12, 2020 by admin


An annuity provides guaranteed income for a number of years, or for the rest of your life. It is also known as a lifetime or fixed-term pension. You can buy an annuity from a super fund or life insurance company. You are able to choose whether you want the payments to last for a fixed number of years, your life expectancy, or the rest of your life. In order to buy an annuity through your super fund, you must be in the ‘preservation age’ which is between 55 and 60. Additionally. You are required to meet a condition of release e.g. permanently retiring. You are also able to buy an annuity in joint names using savings. Through this method, you can split income for tax purposes. If either you or your partner dies, then the survivor has ownership and access to the funds. On the other hand, buying an annuity using a super lump sum can only be in the name of the owner. When you buy the annuity, you decide the payment amount you will receive. This can increase each year by a fixed percentage or indexed with inflation. Further, you can also choose if you are paid monthly, […]


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Claiming your tax deductions

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There are different types of deductions which individuals can claim to reduce their taxable income. Work-related expenses In order to claim work-related tax deductions, the expenses must have to meet three criteria. Firstly, all the expenses have to be paid by the individual, without being reimbursed by the employer. Secondly, they must be directly related to earning your income. Finally, there must be a record of the expenses (i.e. a receipt). There are various different expenses which can fall under this category. Vehicle and travel expenses: Commuting between different locations but not usual travel between home and work Clothing, laundry and dry-cleaning expenses: Cost of work uniform which is distinct and unique (i.e. has a specific logo) Self-education expenses: Any courses or study associated with employees current role, such as textbooks Tools and other equipment: If you purchase tools or equipment, then a deduction for some or all the cost could be claimed Investment expenses The cost of earning interest, dividends or other investment income can also be claimed. This can include: Interest charged on money borrowed to invest Investment property ex[enses Investing magazines and subscriptions Money you paid for investment advice Home office expenses A portion of the costs […]


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Super scams: What to look out for

Posted on November 5, 2020 by admin


The market for super funds is extremely competitive.Scammers take advantage of this by promising unrealistic benefits to acquire personal or account details. They are able to use this information to steal your identity or transfer your super to an account they can access. Scammers can approach you in various ways. You could receive a phone call, email or be contacted online. This is what you should be weary of: Advertisements promoting early access to super Offers to ‘take control’ of your super Offers to invest your super in property Offers of quick and easy ways to access or ‘unlock’ super The best way to spot a scam is to know what the rules about your super fund are. Knowing when you can legally access your super will protect you from false promises. Additionally, the ASIC website lets you check if someone is licensed, if they are not licensed, more likely than not, they should not be trusted. If you believe that you’re being targeted by a scam, then rather than simply ignoring approaches and not engaging, you should report the scam. You can do this by calling the ATO or completing the online complaint form on the ASIC website.


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How are investments taxed?

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Investment income needs to be included when conducting tax returns. This includes any income acquired through interest, dividends, rent, managed funds distributions and capital gains. The income yielded from investments is taxed at a marginal tax rate. Individuals are able to claim deductions for the cost of buying, managing and selling an investment. However, the Australian Tax Office (ATO) provides rules about what an or cannot be claimed as a tax deduction. The MoneySmart website has a simple and easy-to-use tax calculator that may give an indication as to what the annual tax will be. However, it is recommended that if an individual has a diverse portfolio that yields income from multiple sources, then should consult an accountant or advisor that can lead them through the process as it can become quite complex. In order to minimise taxation on investment income, individuals should consider tax-effective investments which provide concessional taxation. These include superannuation and insurance bonds.


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Self-managed super funds (SMSF) aren’t just about financial investment

December 3, 2020

Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees.

Firstly, SMSFs require a lot of on-going investment of time:

Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fee, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio. Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least. Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.
Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.