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The rules governing gifts from SMSFs

All / 10.10.2018

There are now almost 600,000 Self-Managed Superannuation Funds (SMSFs) in Australia where the members of the fund are also the trustees. These trustees are responsible for running the fund according to the superannuation rules. If they get it wrong, the consequences can be dire. Each year, SMSFs lose their concessional tax allowance because the trustees recklessly or persistently ignore the rules.

The superannuation rules aim to ensure that superannuation is for your retirement and is not used for other purposes or invested recklessly. One rule bans a fund from giving financial assistance to members of the fund or their relatives. Whilst this sounds simple, it pays to understand how the rule works.

Who counts as a relative?

The list of relatives in the rules is long and includes everyone you would expect including parents, grandparents, children, siblings, uncles and aunts and nephews and nieces.

The rules also prohibit schemes where financial assistance is provided to a non-relative who then provides support to a relative. Attempting a scheme like this is asking for trouble because it shows you knew the rules and were trying to get around them.

What is financial assistance?

Transactions that are banned by the rules include the following:

  • Gifts and loans;
  • Selling an asset to a member for less than its value;
  • Buying an asset from a member for more than its value;
  • Buying services that are unnecessary or at inflated prices;
  • Providing a guarantee or security using fund assets.

Some examples

  1. A SMSF holds works of art and the trustee gives a painting to his daughter as a birthday present. This obviously breaks the rules. If the trustee paid market value to the fund for the painting, he could then legally make the gift.
  2. A SMSF owns a workshop that is leased to a business run by a member of the fund. The business has cash flow problems and misses the monthly rent payment. No action is taken to recover the debt and the fund is therefore providing assistance to the member.
  3. A SMSF buys a printing machine and leases it to a business run by the members of the fund. When the lease expires, the business buys the machine from the fund at market value plus a margin to compensate the fund for the use of the money. This transaction is effectively a loan to the members and breaks the financial assistance rules.
  4. A SMSF owns a block of land and the trustee sells it to her son at the market price. The son arranges to pay for the land in 12 instalments. Apart from exposing the fund to the credit risk that the son may default on the loan, the transaction breaks the financial assistance rule.

These are only a few examples of what you can’t do as a trustee of a SMSF. To reduce the risk of making an honest mistake, most trustees work with professional advisers to ensure they legally enjoy the flexibility and control that a SMSF offers.

The rules are many so if you’re not sure, please make sure you consult your financial adviser or SMSF specialist before you do anything.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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10 Tips to Have a debt free holiday

All / 04.10.2018

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Is a DIY Will kit enough?

All / 27.09.2018

Is a DIY Will kit enough?

More than 45% of Australians don’t have a valid Will. If you die without one, your hard-earned wealth (your estate) will be distributed according to the rules of intestacy – a government-determined formula. That may not divide your estate as you would like, and if your family consists only of distant relatives your assets could end up enriching your state government’s coffers.

If that’s convinced you that a Will is a good idea, how do you go about making one? There are three main options:

Engage a solicitor

Using a solicitor to prepare your Will, particularly one who specialises in estate planning, is most likely to deliver the desired result. If your situation calls for anything more than the most basic of Wills, for example if there is a family business, disabled dependents, or complex family or financial structures, an estate planning lawyer will be able to provide advice on how to best structure your Will.

The downside is the upfront cost. This can range from a few hundred dollars for a straightforward Will to several thousand dollars where the situation is more complicated.

Use a trust company

There are public or state trustees in each state and territory, as well as a number of private trustee companies. They are specialists in preparing Wills and can also act as the executor of an estate. A private trustee will charge a few hundred dollars to prepare a Will, and the estate will be charged a fee when the trustee performs the role of executor. Some public trustees will waive the fee to prepare or update a Will if they also act as the executor.

Do it yourself

Will kits are available from newsagents, post offices, the Internet and other sources. Doing it yourself certainly appears to be the cheapest option, but if something goes wrong, the cost of putting things right may dwarf the initial savings.

Common problems with DIY Wills include:

  • Ambiguous wording that may need to be ruled on by a court. Fixing this can cost big dollars.
  • The Will is not properly signed or witnessed. This can invalidate the Will.
  • The Will covers only part of the estate. The remainder will be dealt with under the rules of intestacy (ie. your state government decides).
  • The Will contains unenforceable or unreasonable conditions, such as leaving out a gift to an entitled beneficiary. This can also lead to expensive legal bills.
  • Business ownership issues may be overlooked or not properly addressed.

Involve your financial planner

Your financial planner can’t prepare a Will, but as the professional most likely to have a detailed overview of your financial and personal circumstances, he or she is often the person best equipped to identify estate planning issues, and to brief your estate planning lawyer.

Your adviser may also be able to refer you to an estate planning expert, and work with them to create a Will that will deliver a smooth transfer of wealth at a time of great personal distress for your loved ones.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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To gift or not to gift? What about your pension?

All / 19.09.2018

With Australia’s age pension being subject to an assets and income test, a simple way for part-pensioners to increase their pension payments is to give away some assets.

Not surprisingly the government is on to such an obvious strategy. It’s called gifting, and while it is perfectly legal for you to give away whatever you want whenever you want, if you exceed the relevant limits, Centrelink will continue to assess, what it calls “deprived assets”, for five years.

The limits

Gifting is defined as giving away assets or transferring them for less than their market value. Limits are the same for both singles and couples.

If you give away less than $10,000 within a single financial year and no more than $30,000 over five consecutive financial years, Centrelink will disregard these gifts.

Any gifts in excess of the allowable amount will be assessed as an asset (and, where applicable, subject to the income test) for a period of five years from when the gift was made.

Planning ahead

These rules don’t just apply to existing pensioners. They also concern anyone who is applying for the age pension, as recent retiree Frank discovered.

Frank has reached age pension age and based on his current assets and income he should be eligible for a part pension. However:

  • Four years ago he gave his daughter one of his cars, valued at $25,000.
  • At the same time he gave his son $25,000 in cash, to match the value of the car.
  • Two years ago Frank sold a beach house on the open market for $210,000. This was $40,000 less than the initial valuation from the estate agent.
  • In the past year he spent $35,000 on home renovations and $15,000 on an overseas trip.

What does this mean for his pension assessment?

The money spent on renovations and holidays count as normal living expenses, not a gift. Likewise, with $210,000 being the best offer Frank received for his holiday home after it had been on the market for a couple of months, the property would not be considered to have been disposed of for less than its market value.

Whilst he understands that the money he gave to his son is clearly a gift, Frank’s biggest surprise is the treatment of the car. Four years after he gave it to his daughter it’s about to be treated by Centrelink as an asset Frank still owns.

That means Frank gave away $50,000 in one year. The annual ‘Gifting Free Area’ is $10,000, so the difference, $40,000, will be counted as an asset for the next year. This will reduce his pension by more than $100 per fortnight.

If Frank had thought about his pension five years before he was eligible to apply for it, he could have achieved a better outcome.

Seek advice

To gift or not to gift? It’s an intricate question. The right answer depends very much on personal circumstances, so talk to your financial planner. He or she can help you work through all the issues, including the complex calculations of the impact of multiple gifts over several years.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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How might divorce affect insurance cover?

All / 13.09.2018

How might divorce affect insurance cover?

More than 45,000 Australian couples divorce each year, and almost half of those divorces involve children under the age of 18. Thousands of de facto relationships will also come to an end. Regardless of the type of relationship it is a time of great emotional stress.

This stress is intensified by the need to negotiate financial settlements, and with the focus on immediate needs such as funding new living arrangements and paying day-to-day expenses, it can be difficult to think about less pressing financial issues, such as insurance. There are, however, good reasons why personal insurances should be attended to as early as possible.

Ask for support

First of all, ask for support. Stress and good decision-making rarely go hand in hand. If you have a trusted friend or family member who can help you take an objective view of your situation, ask for their help and support through the process.
Early on, take professional advice. A financial planner can guide you through many of the financial aspects of divorce, including insurance. It is crucial that you and your loved ones remain properly covered at all times.

Review beneficiaries

Check who is listed as the beneficiaries on your current life insurance policies. Don’t forget to check if you have life insurance via your superannuation fund. Change your nominated beneficiaries if necessary. One option is to direct that any death benefit be paid to your estate. It will then be dealt with under your Will. That said remember to update your Will, too.

Check your priorities

If you are of working age your most valuable asset is likely to be your ability to earn an income. Safeguarding this via income protection insurance should be a high priority.

If you have financial dependents (usually children) life insurance should also be a high priority. This pays a lump sum upon death that can be used to pay off debts and provide for future living expenses. If, post-divorce, you don’t have any dependents, you may not need this type of cover.

Total and permanent disability insurance pays a lump sum if you meet the policy definition of being totally and permanently disabled. It should be considered, whether or not you have dependents. It is often bundled with life insurance.

The other personal insurance to consider is trauma insurance. This pays a lump sum if you develop one of the medical conditions specified in the policy. It is designed to help with medical and recovery costs.

Strike a balance

While insurance premiums add to the financial stresses associated with relationship breakdown, the consequences of not being properly insured don’t bear thinking about. Your adviser can help you work out a balance between effective cover and affordability.

Knowing you have the right insurance in place to protect yourself and your dependents means there’s one less thing to worry about, so insurance should be dealt with in the early days of divorce or separation. Your adviser can guide you through.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Early Access to Super

All / 13.09.2018

Early Access to Super

We all know that our superannuation is there to provide for our financial needs in retirement. That means we can’t usually access our super until we reach preservation age and meet a condition of release.

 

Preservation age is between 55 and 60, depending on date of birth. It is the age at which you can access the preserved components of your super. However, if you are under 65 that access will also depend on whether you have retired, terminated an employment arrangement, or commenced a transition to retirement pension.

There are, however, several reasons why you might want or need to gain early access to your super. If you have an unrestricted non-preserved component to your super, you’re in luck. This can be withdrawn at any time. Just be aware that some tax may be payable on the withdrawal.

Trying times

Beyond that, early access to super is only available if you find yourself facing really tough times. Superannuation law is quite specific as to what these are.

  • Compassionate grounds, including:
    • Paying for your own medical treatment or that of a dependant;
    • Making a loan repayment to avoid loss of a house;
    • Paying costs associated with the death of a dependant.
  • Severe financial hardship. This provision is available if you have been on eligible government income support payments continuously for 26 weeks and can’t meet immediate and reasonable living expenses. The maximum payment is $10,000 and only one withdrawal is permitted in any 12-month period.
  • Terminal medical condition. This requires certification by two registered medical practitioners. The benefit must be paid as a lump sum and is tax-free if withdrawal is within 24 months of certification.
  • Temporary incapacity resulting from a physical or mental medical condition. The benefit comprises regular payments that are taxed as a normal super income stream.
  • Permanent incapacity. This applies if it is unlikely that you will ever work again in a job you are qualified to do by education, training or experience. The benefit can be taken as an income stream or a lump sum, and is taxed according to the different tax components.

Beware of illegal early release schemes

Unfortunately, schemes offering help in gaining early access to superannuation continue to pop up. These often involve the establishment of a self-managed superannuation fund and target people who are under financial pressure and who have a poor understanding of superannuation rules.

The promoters of these schemes charge high fees before disappearing. The victims end up facing massive fines or imprisonment, and often discover that their identities have been stolen.

Expert help

While applications for early release can be made directly to your superannuation fund, the best place to start is with your licensed financial planner. Aside from a helping hand at a time of major stress, your adviser will be able to identify other financial issues that may need to be addressed, including insurance claims, and eligibility for social security or assisted living.

If you find yourself in this position, or a loved one needs professional guidance in this area, contact TNR Wealth Management.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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A different way to help the grandkids

All / 07.09.2018

A different way to help the grandkids

Many grandparents want to give their grandchildren a head start in life, and a common way to do so is to help by paying some (or all) of their school fees. This can, of course, simply be done by making a contribution at the time the fees are payable. However, it’s not unusual for grandparents to plan ahead by setting funds aside in a specific account. That is one option, but there might be a better one.

Plan A

Donna and Simon are a typical example. They decide to put $50,000 into a term deposit to help pay the school fees of their granddaughter Ellie when she starts secondary school in 10 years’ time.

With an interest rate of 2.6% per annum (pa) and interest paid annually, their initial deposit will grow to $64,631 – a nice boost to Ellie’s future education.

But is there a better way to use that $50,000?

While it’s nice to have a specific account with its special status and easy to see growth, the important thing is the overall pool of money available to the family when the time comes to stump up the school fees.

Plan B

Ellie’s parents, Sara and Shane, are five years into paying off their mortgage. Their interest rate is 5% pa, the remaining balance is $530,000, and their monthly repayments are $3,500. If interest rates and payments remain steady, in 10 years’ time their mortgage balance will be down to around $329,427.

What if, instead of setting up the term deposit, Donna and Simon gift the $50,000 to Sara and Shane who then deposit it in their mortgage account? This sees them effectively servicing a smaller loan. Maintaining their usual monthly repayments will now reduce the amount they owe on their mortgage in 10 years to approximately $247,077, giving them more equity in their home to draw on for school fees.

Difference

Plan A turned $50,000 into $64,631, a net benefit of $14,631. But plan B more than doubled that benefit to $32,350!

Of course, Donna and Simon will need to feel confident that they can trust Sara and Shane to use the gift in the way they intend, and not to redraw it for holidays or other purposes. And if they are receiving any age pension, or intending to apply for one in the next five years, Donna and Simon will also need to be aware of the gifting rules and how this gift could impact their pension payments.

Get advice first

This is just one example of how inter-generational planning can significantly grow the wealth of the extended family unit.

If you’re seeking the most effective way to assist your children and grandchildren financially, talk to your financial planner first.

and your family.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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What is the Pension Loan Scheme?

All / 30.08.2018

What is the Pension Loan Scheme?

Currently 1.8 million Australian homeowners receive some level of age pension, with around 700,000 on a part pension.

What many of these part-age pensioners may not know is that, along with recipients of the disability support pension, carer payment and some other Centrelink payments, they are able to access some of the equity in their home through the Pension Loan Scheme (PLS).

What is the PLS?

The PLS provides a type of reverse mortgage that is aimed at supplementing retirement income.

  • It is paid in the form of a regular fortnightly payment from Centrelink. Payments are not taxable.
  • The maximum payment is the difference between the amount of actual pension received and the current rate for a full pension.
  • The interest rate is 5.25% per annum. This is significantly lower than the rates charged by most lenders and has not changed since 1997.
  • The loan can be secured against your home or an investment property.
  • A PLS loan can be partly or fully repaid at any time. Although not required, typically, the loan is only repaid when the property is sold. The value of the loan therefore increases due to the regular payments made to the pensioner and the growing interest amount.
  • The total amount the pensioner can borrow depends on the equity they have in their home; how much of this equity he or she wants to retain; and their age (or the age of the youngest member of a couple).

Pros and cons

The obvious advantage of the PLS is that it provides a supplementary ‘income stream’ to support quality of life in retirement.

The big downside is that the amount of the loan increases exponentially over its lifetime. This can significantly decrease the ultimate value of the estate passed to beneficiaries.

The PLS only provides fortnightly payments within the set limits. If you need a lump sum, say to pay for modifications to your home, a reverse mortgage may be more appropriate.

The PLS in action

Des is 67, widowed, and has no children. He owns a home valued at $750,000 and a very comfortable beach house he regularly escapes to, which hasn’t left much in the bank. He is the epitome of “asset rich, cash poor”. He receives a part pension of $250 per fortnight (pf) but he wants to enjoy life a bit more. As the maximum age pension is $908 pf (i) Des could receive up to $658 pf extra under the PLS. This is more than he needs, so he opts for payments of $500pf.

Des maintains the same rate of payment for the next ten years. Over that time he receives a total of $130,000 in additional ‘income’ from the loan. However, his outstanding loan balance after ten years is $171,594. That means he has racked up an interest bill of $41,594. If Des sold the house at this ten-year mark, he would need to repay the full $171,594 from the proceeds.

That may sound like a lot, but if his house was worth $750,000 when he took out the loan, and if it increased in value at a rate of 7% pa over the ten-year period, it could be worth just under $1.5 million.

Potential changes

In the 2018 Federal Budget the government proposed expanding the PLS to all Australians of age pension age, including self-funded retirees and full pensioners. The maximum amount of the combined pension plus the PLS income stream would be increased to 150% of the age pension rate. If these changes are legislated it will open up the scheme to many more people and allow them to take out bigger loans.

Seek advice

Taking on any type of debt, particularly later in life, needs to be approached with knowledge and caution. PLS loans are subject to a number of eligibility criteria, and both the positives and negatives must be considered.

Your financial adviser is ideally placed to help you understand how the PLS works, and if it is appropriate for you and your family.

(i) Including supplements

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Lending money to friends or family – should you do it?

All / 30.08.2018

Lending money to friends or family – should you do it?

What would you do if a family member asked to borrow money – besides the less painful option of beating yourself over the head with a fence paling? You want to help, but you’re right to be wary.

It’s a difficult subject that despite everyone’s best intentions, often ends in tears.

 

You’ve worked hard, saved for retirement, paid off your home and raised your kids. You’re sitting on a nice little nest egg and expect life to be cushy. Here it comes:

  • your teenager wants to buy a car,
  • your kidult needs help getting into a first home,
  • a sibling has a brilliant start-up business idea,
  • your between-jobs best friend is struggling to make mortgage repayments.

Let’s say you agree, now what? Can you be certain you’ll see your money again? How do you preserve the relationship? Where will the money come from: Savings? Superannuation?

Stop right there!

You really should speak with your financial adviser, after all, whether you’re retired or still working, your financial strategy may be disrupted.

If you’re working, taking money from savings may adversely affect your investments or other plans, such as your annual holiday. If you’re retired, withdrawals from super or pension accounts may impact your income stream and how long your income will last.

After speaking with your adviser, if you decide to go ahead with the loan, it’s recommended that you draft a legal agreement. It should cover the following:

  • the loan amount,
  • by when it should be fully repaid,
  • how/when repayments will be made – instalments, lump sum, etc.,
  • whether interest is charged and, if so, how much,
  • what happens if the borrower’s situation changes through unemployment, divorce/separation, etc.
  • action taken if terms are not met.

Both lender and borrower agree to the terms, and once it has been checked by a legal professional, each party signs.

Other options

If you are reluctant to lend the money but still want to help, there are some alternatives but they also have their pitfalls.

Co-borrowing means the money is borrowed from a financial institution and both of you sign. If either party fails to meet their share of the loan, the other is responsible for repaying the full amount.

Guarantor allows your friend/family member to borrow the money themselves. You sign as guarantor meaning you are legally responsible for repaying the entire loan if payments are not made.
Gifting means you give the money to the borrower. If you’re receiving Centrelink benefits, gift amounts are limited and benefits may be affected. You must seek advice from your adviser and/or Centrelink.

These options may also impact your credit rating and your future borrowing eligibility. Additionally, if you forgive a loan, Centrelink may treat it as a gift and assess you accordingly.

It might seem distasteful, but you must consider your own position carefully. Seek professional advice and take steps to protect yourself.

Remember: “reality” television courtroom shows wouldn’t exist if people didn’t borrow money from one another!

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Unlocking the mysteries of your super statement

All / 15.08.2018

Superannuation statements. Boring, right? But if, like many people, you toss your annual super statement in a drawer or hit delete, you could be depriving yourself of many thousands of dollars just when you need it. So it’s worth the small effort to take a closer look at your superannuation statement. If everything is in order, you’ll get a warm glow from watching your nest egg grow. Conversely, a quick check of your statement may reveal some of the common problems that occur with super; and the sooner these are fixed the quicker your savings can increase.

What to look for

The layouts of statements vary between super funds, but there is standard information that must be provided. Some items may appear in summary form, with a detailed breakdown shown elsewhere. Here are the key things to look for:

  • Contributions or funds in. This will cover employer and personal contributions, government contributions and rebates, plus any rollovers. If you’re an employee earning more than $450 per month, your employer should be paying 9.5% of your ordinary time earnings to your super fund. Payments can be made either quarterly or monthly. Calculate the contributions shown on your pay slip are at the right rate and that they match the contributions received by your super fund.
  • Funds out. Most commonly this comprises administration and investment management fees, and any insurance premiums. Excessive fees can place a real drag on the performance of your savings, so check that they are competitive with other funds.
  • Investment earnings. This covers interest and share dividends, along with any capital growth in the value of your investments. Be aware that depending on your specific investment mix and the performance of markets, this figure may sometimes be negative.
  • Insurance cover. Your super fund may provide death and/or disability insurance. If so, check that it is appropriate and adequate for your needs. Maybe you are paying for insurance cover you don’t need, or are inadequately insured.
  • Investment options. This will show what your money is invested in, and in many cases the performance of each investment. Your investment choices will be one of the main influences on the ultimate value of your retirement savings. Professional advice in this area is strongly recommended.

Other things to check

  • Have you provided your tax file number? If not, the fund will be deducting too much tax from your contributions and earnings.
  • Have you made a binding death benefit nomination? This allows you to choose, within applicable rules, who your superannuation is paid to upon your death.
  • Is your name and address up to date? Is it possible you have ‘lost super’. This occurs when a super fund can no longer contact you. The Australian Tax Office can help your find lost super. Start here https://www.ato.gov.au/forms/searching-for-lost-super/.
    More than one statement? Ideally, you should consolidate all your superannuation into one fund. This will avoid duplication of fees and insurance premiums, and make your super much easier to manage.

It may not rival the latest video game or binge-able TV series for entertainment value, but delving into your super statement can be way more rewarding.

Invaluable advice

Super is one area in life where professional advice can really pay off. If you need help with understanding investment options, consolidating multiple super funds, finding lost super, or ensuring you have the right insurance cover, talk to your financial adviser. The sooner you do, the sooner you’ll be on track to growing your super pot of gold.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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