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Investing in trends

All / 14.10.2021

Investing in trends

What are some of the big ideas, the themes, that are likely to influence the economy, both locally and globally, in coming years? How about Australia’s aging population? As we collectively grow older we should see increasing demand for assisted accommodation, leisure and entertainment services, escorted travel, pharmaceuticals, healthcare and more. Waste is a growing problem. What does this mean for the development of new recycling technologies and recycled products? Which is the next emerging market or technology set to grow at a spectacular rate?

Picking the right trend and investing at the right time can deliver quite a boost to a portfolio’s performance.

Traditionally, thematic investing has involved buying numerous shares in relevant companies or trying to find a typical managed fund that matches to some degree with the selected theme. But as more trends emerge an increasing number of exchange traded funds (ETFs) have appeared that precisely target a range themes.

ETF basics

As their name suggests, ETFs are managed investment funds that are traded on a stock exchange. Their units are bought and sold in the same way as shares so, unlike unlisted managed funds, it’s possible to enter or exit a position in a matter of minutes. Most ETFs follow a specific index or track a benchmark. For example, an S&P/ASX 200 index ETF will deliver the performance (less fees) of Australia’s 200 largest companies. With relatively low fees and transaction costs ETFs provide a convenient way to construct balanced and internally diversified share portfolios.

While ETFs have historically tracked the major indices (ASX200, S&P500, FTSE, etc) a growing number of ETFs now cater to more focused investing. Investors can now easily gain access to companies engaged in cloud computing, biotech, artificial intelligence, cybersecurity, climate change mitigation and many more niches.

Electric dreams

One investor taken with the thematic approach is James. He has heard that in the not-too-distant future a number of countries plan to phase out the sale of cars powered by fossil fuels. This, he believes, will massively increase demand for battery electric vehicles (EVs) and the components they are made from. James anticipates that this will see not only EV manufacturers, but also lithium miners and the companies that are developing new battery technologies experience massive growth and generate profits to match.

To back his conviction James could buy shares in a range of EV makers, lithium miners and battery companies. However this may create a mountain of paperwork and incur multiple brokerage charges on relatively small holdings.

Or he could make use of one or more of the growing number of exchange traded funds (ETFs) that cater to his interests.

James does some homework and discovers a battery technology and lithium ETF that invests in EV companies, lithium miners and battery technology companies – just what he was looking for.

A word of caution

There are no guarantees that thematic investing will deliver higher returns. The ‘tech wreck’ of 2000 provides one enduring lesson. So no matter how compelling any thematic story might be the basic rules of investment still apply, starting with ‘don’t put all your eggs in one basket’.

But if you want to add another dimension to your portfolio, keep an eye on the trends that are constantly emerging, decide which ones might be worth investing in, and ask your financial adviser for an objective opinion of your pet themes.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Why financial advice may be your best investment

All / 07.10.2021

Why financial advice may be your best investment

It is commonly assumed that seeking financial advice is for the wealthy, and it only helps the rich become richer, yet financial advice can prove useful to anyone who wishes to better their financial future.

Financial advice is like getting a health check-up for your financial situation. Your financial adviser is like your personal trainer, assisting you in achieving your best possible financial health.

Seeking professional financial advice provides you with a clear path to achieve your financial goals, and that is an investment worth making.

Why invest in financial advice?

Imagine a couple in their early 30s who started investing in the share market in 2019 to save for their children’s private school fees over the next 10 years. Their shares dropped by 35% during the March 2020 market crash caused by the COVID-19 global pandemic. They panic and sell their shares, incurring a loss. However, a good financial adviser would explain the risks, provide examples from their experience and probably would have advised them to hold the course because theirs was a 10-year long term plan. Within a year, the share markets recovered and are now higher than ever.

Financial advice isn’t only about investing your money in the share market. Want to save to buy your first home? Want to protect your children in case of your death? Want to enjoy a comfortable retirement? Don’t understand what to do with your super or how to invest in the share market? Think of a financial adviser as a one-stop shop for the majority of your financial issues in life.

Come to think of it, be it your parents telling you to save money from your first job or an Instagram ‘finfluencer’ explaining the benefits of compound interest while dancing to a trendy song, these are all informal pieces of financial advice you receive throughout your lifetime.

However, a professional adviser can legally provide holistic advice by reviewing your entire financial situation and your risk-taking capacity to recommend an appropriate investment portfolio. Also, an adviser’s investment recommendations are based on research which can give you comfort over your decisions rather than constantly worrying about the investment you made based on your work colleague’s stock ‘tip’.

Is financial advice cost effective?

The financial advice industry has undergone a monumental transformation following the Financial Services Royal Commission of 2017-2019. As a result, new education and compliance requirements have been legislated to further protect the client’s best interests.

This has led to a drop in the number of financial advisers Australia-wide – from approximately 28,000 in 2018 to just 19,000 in 2021.

The silver lining here is that while there are fewer advisers to choose from, the quality of advice is deemed to improve exponentially.

As per Russell Investments “Value of an Adviser” report, advisers added a value of approximately 5.2 per cent to their client’s portfolios in the 2020 COVID-19 pandemic.

Still, the true value of financial advice is much more than comparing the fees you pay against the performance of your investments, or the tax saved on your income.

A financial adviser can be a sounding board for your financial ideas, a resource to answer the simplest or most complex of queries, provide research-backed recommendations, and guide you over the long term based on their experience.

Ready to make the investment?

Your day to day job may not allow you to focus on the financial aspect of your life. In contrast, your financial adviser’s primary daily responsibility is to help you handle your finances efficiently.

So, are you ready for your financial check-up? Take the first step and book an appointment with a financial adviser today.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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The art of dividend reinvestment

All / 30.09.2021

The art of dividend reinvestment

The real power of investment comes from compounding returns – the process of putting your investment income straight back to work so it can earn more income. To help their investors reap the rewards of compounding, many companies offer dividend reinvestment plans (DRPs).

The potential benefits of a DRP

Under a DRP, investors can choose to use some or all of their dividends to automatically purchase additional shares in the company. As a sweetener, investors avoid brokerage, and some companies even offer a discount on the share price. This means that dividend payments are working to earn new dividends rather than languishing in low-interest bank accounts.

Participants in DRPs can also benefit from dips in the market. When prices are down, a given dividend amount will buy more shares than when prices are high. However, be aware that it is entirely up to each individual company’s management to decide whether or not it will offer a DRP, and that the plan can be suspended or altered at any time.

Who might DRPs suit?

DRPs are suited to investors who do not need the income and who are seeking to maximise the growth of their portfolio. They can also be good for ‘lazy’ investors. Once the nomination to participate in the DRP is made it happens automatically with each dividend payment: no further action required.

That said, DRPs can generate a lot of paperwork. Each purchase is a separate event with its own cost base for capital gains tax (CGT) purposes, and its own start date for the CGT discount.

DRPs are not suited to retirees and people who are drawing down on their portfolios and dependent on all the income it can produce.

Don’t forget the tax

With a DRP the dividend never hits your bank account, but that doesn’t mean you haven’t earned it. It still needs to be declared as income on your tax return, along with its associated franking credits (the tax already paid by the company). Depending on your marginal tax rate, the franking credit may be sufficient to cover any tax payable on the dividend, or you may even receive a refund. If not, you will need to pay some additional tax, so be prepared for this.

Alternatives to DRPs

DRPs can be good for investors who have a positive view of the company they own shares in and are happy to increase their holding in it. Of course, if the company turns out to be a dud, partaking in a DRP will magnify the ultimate losses.

An alternative is to take cash dividends and regularly apply them to purchasing other assets. This can still provide the benefit of compounding while creating an opportunity to further diversify and rebalance the portfolio.

Dividend Reinvestment Plans can be an effective component of an investment growth strategy. The quality of the company offering the plan is paramount, but record keeping and income requirements also need to be managed. Your financial adviser will be able to further explain the potential pros and cons of DRPs and help you decide if they are right for you.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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You can borrow within your SMSF … but is it a good idea?

All / 23.09.2021

You can borrow within your SMSF … but is it a good idea?

Investing in property seems part of every Australian’s DNA. No matter where you buy, prices appear to be on a permanent skyward march with none of the unnerving fluctuations seen in other investments, such as the share market.

Ask anyone over the age of fifty what their best ever investment was, and inevitably they will answer, buying their own home. Their biggest regret? Not buying the house next door at the same time.

So where better to invest your precious retirement savings but in property?

For many, it’s the perfect set and forget strategy. Borrow funds to buy a property, rent it out to tenants, and let the rental income pay off the loan. Then in 20 years’ time, you have your own home-grown nest egg.

It sounds like a great strategy to help build your retirement savings, particularly if you can use your superannuation to make it happen. Yet as foolproof as this might seem, there are a number of traps to be aware of.

Firstly, the only way to buy a particular house or apartment using your superannuation savings is via a self-managed superannuation fund, a so-called DIY fund.

As the fund’s trustee, you will need to fully understand your responsibilities in running the fund and be able to demonstrate to the Australian Tax Office that you have thought through your decision to set the fund up.

Secondly, self-managed super funds can be expensive to establish. You will need to pay for an accountant to lodge a tax return for the fund each year and ensure all appropriate compliance and regulatory paperwork is up to date.

Finally, there are also strict diversification rules in place for all superannuation funds, so a substantial balance within your fund will be required to allow the purchase of a single property outright and still hold some cash within the fund.

Alternatively, you can arrange to borrow within your self-managed super fund to acquire a property, but again there are many traps for the unwary if you do decide to go down this path.

Loans used within self-managed super funds to finance a property acquisition are a very particular type of loan and are referred to as limited recourse borrowing arrangements.

Reflecting the complexities of these loans, borrowing within a self-managed super fund is much more expensive in terms of the interest rate charged and the amount able to be borrowed is usually restricted to 60 per cent of the property’s purchase price.

There is also a raft of other regulations governing buying property using superannuation savings, such as the need to establish a bare trust, for example, to hold the investment, or that you cannot, under any circumstance, rent the property yourself or rent to a family member.

When buying an investment property, the usual challenges should also be considered in terms of finding the right property, a good quality tenant, and ensuring the property itself is maintained and kept in a suitable condition.

None of these issues are insurmountable. They simply mean that for those looking to use their retirement savings to invest in property, good advice is critical to ensure it is done correctly.

This includes having a good accountant to make certain your superannuation fund is run appropriately, a great mortgage broker to find you the best limited recourse loan, and, of course, an astute real estate agent to find and manage the property.

Once you tick these boxes though, you can step back and be confident that you have made a well-informed and unrushed decision. Hopefully, as time passes, your property will not only be paying itself off but will be slowly increasing in value.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Mistakes new investors should avoid

All / 09.09.2021

Mistakes new investors should avoid

You’re young, expecting a satisfying future brimming with friends, family and a comfortable lifestyle.

You’re a Next Generation Investor, likely aged between 18 and 25, and you’re starting to think about financial security.

According to an Australian Stock Exchange study, nearly a quarter of all investors over the past two years were Next Generation Investors. Additionally, some 27% of surveyed people under age 25 intend to invest over the next year.

The excitement of embarking on a journey toward financial freedom is common, as is confusion, after all, in the rush of enthusiasm, how can you ensure you get the decisions made for the future, right today? Further, what are the rookie mistakes to watch out for?

Here are a few that can be easily avoided.

Not clearing debt first

Student loans and credit cards have a knack for eating away income. We’re not saying don’t save at all, but we’re recommending you clear as much debt as possible before committing to serious investments.

Track your spending to spot potential savings, then channel that cash towards your debts. Every little bit helps.

No strategy

Desire to build wealth through investment is not a strategy. Saving for a new car, a home deposit? Perhaps you’re planning to retire in your 40s? The end game determines which investments will be most suitable.

Now, consider how you feel about risk and whether you’ll need access to your money. Successful investment strategies are planned.

If it feels overwhelming, seek professional advice to help you build your strategy. You’ll be surprised at how inexpensive a financial adviser can be.

Not diversifying

Generally speaking, the higher the potential return, the higher the potential risk.

Market-linked investments, like shares, can be big-earners, but you’ll have to ride economic ups-and-downs to get there – sometimes for ten years or more.

If this worries you, consider lower-risk investments. Conservative in nature, their returns are generally lower, but you’ll probably sleep better.

Decide how much risk you’re comfortable with. You may be better off minimising exposure to high-risk assets by diversifying your portfolio with a variety of investment types.

Trying to predict the market

Investment markets are notoriously unpredictable; even experienced traders sometimes get their timing wrong. Buying shares at the wrong time can mean you pay more than you should, similarly selling at the wrong time can result in losses.

Short-term buying and selling might seem exciting, but it’s a fast-track to losing money. The way around this, as previously mentioned, is research, diversification and being prepared to stay the distance.

The magic word is patience.

Review

No investment is a set-and-forget scheme. Always keep track of your savings and your ongoing investment plan, ensuring that it continues to align with your goals, particularly as they change over time.

A flash car may be your priority today, but fast-forward a couple of years and perhaps marriage and children are your priorities.

As your goals change, so must your investment strategy.

A few other things…

Fees and taxes are unavoidable and various investments attract different expenses and tax structures. Find out what you’re up for before making financial decisions.

Feeling lost? The Australian Stock Exchange offers free online courses and the Government’s MoneySmart website has a free info Starter Pack to get you underway.

Of course, nothing beats professional advice tailored to your needs. The Financial Planning Association of Australia will put you in touch with a qualified adviser suitable for you.

Strategic investing sets you up financially, and helps create a savings habit for life. Your financial future begins today.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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5 tips to protect yourself from being scammed

All / 02.09.2021

5 tips to protect yourself from being scammed

In 2020 Australians reported over 7,000 investment scams to Scamwatch, well up on the 5,000 reported in 2019. Scamwatch recorded investment scam losses of $65.8 million, but add in notifications made to other government agencies and the major banks and reported losses across 2020 soared to $328 million. Due to embarrassment many losses go unreported so we may never know the full extent of the damage.

With a high likelihood that we will all be targeted by scammers at some stage, perhaps repeatedly, how can we identify scams and protect ourselves from losses?

Ignore unsolicited offers

Most investment scams start with a phone call. No matter how compelling the story told by the caller, if you haven’t done anything to invite contact from an investment’s promoter, it is likely to be a scam. The simple solution? Hang up early in the call. If the approach is made by e-mail, social media or text message don’t click on any links and delete the message.

Beware of promises of large and guaranteed returns

In times of low interest rates it’s hard to find a good return on lower risk investments such as term deposits and bonds. The promise of high returns, perhaps with a built in guarantee may look compelling. But the age old saying holds: if it seems too good to be true, it probably is.

Some investors are willing to put such promises to the test by making a small investment. When professional looking statements show that the promised performance is being delivered, the investor makes a much larger deposit. Not long after that the promoter seemingly disappears.

Research the promoter through independent and official channels

Are they based overseas? This is a big red flag. If Australian, are they (and their prospectus) registered with ASIC? Do they have an Australian Financial Services Licence? Do they appear on the list of companies you should not deal with (available at moneysmart.gov.au)? Is their street address genuine and do they have a physical office? How long have they been in business?

Get independent advice before investing

Even with a legitimate investment an independent assessment is a good idea. With a questionable investment it might just save you from being scammed.

Educate yourself

Scams are evolving all the time. Government websites moneysmart.gov.au and scamwatch.gov.au provide information on a wide range of scams and are updated as new scams appear. They also provide advice on how you can protect yourself.

What can you do if you’re the victim of a scam?

You can make a report via the Scamwatch website (operated by ACCC), to ASIC and to your local police. Stop sending money to the scammer, and beware of the double sting where scammers offer to help you recover your losses, for a fee, of course.

While ASIC and ACCC do not provide direct assistance to scam victims, the information can help with investigation and law enforcement, and provide intelligence on scam activity. Police may also be limited in their ability to identify and prosecute scammers, particularly if they are located overseas. The sad fact is that most victims of scams never see their money again.

Practical help is available from IDCARE. This is a free support service that can assist businesses and individuals with a range of cyber issues including identity theft, romance scams and investment scams.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Is a DIY Will kit enough?

All / 26.08.2021

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 6626 3000.

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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Who gets your super?

All / 19.08.2021

Who gets your super?

Who decides what happens to your superannuation savings when you die?

You may think that you do, but that isn’t always the case. The ultimate decision may be made by someone you don’t even know – the trustee of your superannuation fund. Let’s look at how you can have greater control.

Binding death benefit nominations

The most certain way to direct payment of your superannuation death benefit is by making a binding death benefit nomination. The nominated beneficiaries must be ’dependants’ – a spouse, de facto spouse, child or financial dependant – or a legal personal representative (ie. the executor or administrator of a deceased estate.)

If the nomination has been properly signed and witnessed, and is still current at the date of death, then the trustees of the superannuation fund must pay the death benefit to the nominated beneficiaries.

Unlike Wills, valid binding superannuation nominations are unlikely to be overturned by a court, so they provide great certainty. It is up to the trustees of each superannuation fund to decide whether or not to allow binding nominations, so they aren’t available to everyone.

Although some funds offer non-lapsing binding death benefit nominations, most are only valid for three years, so it’s important to check yours and ensure it remains up-to-date.

Trustee’s discretion

The trustee is under a legal obligation to pay a death benefit to the member’s dependants, and in most cases benefits will be paid in a way that is consistent with the wishes of the deceased member. However, it is possible the trustee may recognise a wider range of dependants than the member would have liked – including a separated spouse.

In some cases, the member’s preferred beneficiary may not meet the legal definition of a dependant. This may apply to parents. In the absence of any dependants and a legal personal representative, the trustee may exercise their discretion, and pay the benefit to a non-dependant.

While dependants receive lump-sum death benefits tax free, the rate of tax payable by non-dependants can vary from nil to 30% depending on the components of the superannuation payment.

Superannuation pensions

The situation is a little different if the member has already retired and is drawing a superannuation pension. With pensions, it is common to nominate a surviving spouse as a reversionary beneficiary. This means the pension payments will continue to be paid to the nominee, either until their death, or until the funds run out. If the reversionary beneficiary dies, any remaining balance is then paid out as a lump sum death benefit according to the type of nomination they have made.

Good advice required

Increasing levels of wealth being held via superannuation and the nomination of beneficiaries should be made in the context of a comprehensive estate plan. This includes taking into account the way superannuation death benefits are taxed when paid to different types of beneficiary. Your financial adviser can help you make the right decision.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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 happens when you can’t manage your SMSF?

All / 12.08.2021

What happens when you can’t manage your SMSF?

More than 1.1 million Australians manage their superannuation via a self-managed superannuation fund (SMSF) structure. Many are motivated by the desire to have control over their own money, the potentially lower costs, or the option to make investments that aren’t available to members of public offer funds. Whatever the reason, if you are a trustee of a SMSF, have you stopped to ask yourself, “Who will look after my super if I can’t?”

Members of SMSFs tend to be older than the population as a whole. While we are living longer and healthier lives, many people will reach the stage where they are no longer able to properly look after their financial affairs. Due to the high regulatory requirements controlling SMSFs, the penalties for not managing your fund correctly may be substantial. So what are the options?

Rely on the other trustees

If the fund has more than one member, is the other trustee(s), or directors of a corporate trustee, able to manage the fund? While it’s common for a SMSF to have two members, usually spouses, it is often the case that only one knows what’s going on. With single member funds, it is possible to appoint a second, non-member trustee, but it is important that they have the skills to run the fund if necessary.

Appoint an attorney

Whatever your circumstances, you should provide an enduring power of attorney to a trusted and informed person. This allows them to step in and manage your affairs if you can’t. However, if your attorney is to help manage your SMSF, he or she needs to be both willing and able to do so.

Switch to a small APRA fund (SAF)

A SAF is similar to a SMSF but with an external, professional trustee. While SAFs offer most of the benefits of SMSFs, trustee fees can increase the costs of running such a fund.

Rollover to a managed superannuation fund

While a retail or industry superannuation fund will restrict your investment options, for example not allowing you to hold direct property within your super, all of the administration and many of the investment decisions will be made by professional managers. Overall fees may be higher with these funds, but they take the weight of fund management off your shoulders.

Use an adviser

A qualified financial adviser with the appropriate systems in place can help you manage your SMSF. In the event that you lose the ability to make decisions about your fund, an adviser can also assist other trustees or your appointed attorney. Depending on the size of the fund, the overall cost of using an adviser can be less than the total fees charged by managed super funds, while ultimate responsibility for fund compliance remains with the trustees.

It can be difficult to decide when the time is right to hand over the reins of your super to someone else. It’s important to make plans, discuss them with your fellow trustees or your attorney, and to seek professional advice as to the best way to ensure your super will be well managed if you can no longer ‘do it yourself’.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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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Is your business your super?

All / 05.08.2021

Is your business your super?

Many self-employed people view the sale of their business as their retirement fund – their superannuation. So just like ensuring superannuation investments are being well managed, business owners need to plan ahead to ensure their business can continue to provide a reliable income after they retire.

One of our new clients, Dale, is a typical example of this expectation – he is an accountant working from his custom-built office attached to his house. He wants to retire in a few years, and has always assumed that he can sell his business and retire on the proceeds. Although he advises his clients to plan ahead, amazingly he has failed to follow his own advice and has never documented a succession plan.

The value of a business

Dale understands the value of the loyal client list he has built up over 20 years. Those clients will continue to need good accounting advice in the future, and their fees will provide an ongoing income stream to the business that services those needs. If Dale can transfer his clients’ loyalty to another accountant, then it represents an asset he can sell.

To plan his succession, Dale could explore a few options. He could employ a junior accountant to train up with a view to having him or her buy his business. Or he might be able to sell the business to an established accounting firm and continue to work with his clients as he transfers their loyalty to the new owner.

What about tax?

Any sale proceeds Dale receives will be treated as a capital gain, which would normally be subject to tax. However, a number of concessions are available to small business people, particularly when it comes to retirement. These concessions are designed to reduce or eliminate any capital gains tax payable on the proceeds of the sale of the business.

Relinquishing control can bring rewards

Business succession confronts many small business operators. It’s not a case of one size fits all. The specifics of the succession plan will vary from business to business, and it may present a significant challenge for independently-minded owners. After all, it means progressively giving up control and letting go of the day-to-day running of something they have created personally. It’s sometimes a good idea to engage a business consultant to help design and guide the succession strategy.

Will your business fund your retirement?

For many people, converting a business into an asset that can be sold for a six or seven figure sum could be the most profitable use of their time between now and their ultimate retirement.
If you’re a small business owner, ask yourself, what does your retirement fund look like? If you don’t have an answer, talk to us sooner rather than later. Then you can get back to running your business knowing your ‘superannuation’ is being well managed.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

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.
Read More >>