With a growing trend towards individuals managing their own superannuation through Self-Managed Super Funds (SMSFs), the estate planning aspect of SMSFs is becoming an increasingly important issue. For example, what happens if the trustees or members of the fund are no longer able to fulfil their roles through mental incapacity or sickness?

If you are getting on in years, here are some options to consider for your SMSF:

1. Appoint a professional trustee. Giving up full responsibility for the operation can be a good idea but it will involve extra cost. Also, your lifestyle may be affected due to delays in accessing funds. A retiree running his or her own SMSF can access money immediately, while a professional trustee may take several days to release cash.

2. Draw up a power of attorney (POA). It is necessary to exercise care when appointing someone as your attorney as they will have full control of the SMSF and must act in the best interests of the trustees. This person should also have a sound understanding of business and financial management. The POA may also be the executor of your estate.

3. Rollover to a public offer or industry fund. This involves selling or redeeming the SMSF’s assets, so capital gains tax implications need to be considered. Loss of control over the fund’s investment decisions and the investment options available within the new fund also need to be taken into account.

4. Include your children. Once your children are sufficiently mature they may be added as members or trustees of your SMSF. They should then attend all relevant meetings and be involved in the decision-making. Families with more than two children may find this option tricky as SMSFs are currently allowed only four members.

Talk to your licensed financial adviser about the most appropriate option for you to ensure the smooth operation of your SMSF should something happen to you.

Sources:
Murden, M and Gandolfo, P ‘The trouble with ageing trustees’ National Accountant, February/March 2010
www.ato.gov.au   Self managed super funds – key messages for trustees

We are here to help with your SMSF 
Call (02) 4926 2300 or email us. 

To discuss your super through SMSFs or your super in general call the team at Leenane Templeton. 

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There will be no changes to the super contributions caps for the 2015/16 year. 

Limits will remain the same as last year:

It's important to note that Super Guarantee contributions on salaries of more than $315,000 per year will be in breach of their caps without anything else being counted. 

If you wish to discuss Super caps further, please do not hesitate to contact the team at Leenane Templeton on (02) 4926 2300 or email us. 

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June 30 is fast approaching but there’s still time to consider strategies to help you build your wealth and reduce the amount of tax you pay.

Pay interest in advance

Borrowing to invest may be a tax-effective means of wealth accumulation. This type of strategy lets you purchase property, shares, or any other asset that generates assessable income, by bringing forward next year’s interest cost, and allowing you to claim a tax deduction for those costs this financial year.

Make a concessional contribution to super

If you are self-employed, or earning less than 10 per cent of your income from an employer, you can generally claim a tax deduction for super contributions up to $30,000 (or $35,000 if you were aged 49 or over on 30 June 2014). The Federal Government also pays a 15 per cent low income superannuation contribution of up to $500 on concessional contributions made by individuals with a taxable income of less than $37,000.

Protect your income and save on tax

Income protection insurance not only pays you a monthly benefit of up to 75 per cent if you become unable to work due to illness or injury, but also allows you to pre-pay your premiums and claim a tax deduction. If you pay your premiums in advance, you can claim a tax deduction for next year’s premiums in this financial year.

After July 1, consider the following:

1. Have your financial goals changed?

Your goals can change greatly from year to year. Major life events such as serious illness, the birth of a child, or the death of a parent or spouse can all result in significant changes to your wealth management goals.

2. Prioritise your goals

It’s important to be realistic about how soon you can accomplish your financial objectives. For example, reducing any personal loans is likely to be a short-term goal, setting funds aside for your child’s education could be a medium term goal. Paying off your mortgage and providing for retirement are long-term goals.

3. Be investment savvy

Make sure that your investments support your appetite for risk and your objectives. A tailored analysis will address your individual risk preferences. Regular portfolio reviews with your planner are essential to determine any sell-downs or top-ups that would benefit you.

4. Do you need to change your financial strategy?

Your financial planner has the tools and knowledge to create projections that take into account changes to your goals, risk level, and the timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

Speak to your financial planner to discuss your end of financial year strategies.
Call (02) 4926 2300 or email us.

Our team of qualified and friendly accountants are ready to help with any questions you may have in relation to your end of financial year preparation.

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Some people may think that a financial advisor’s role is to forecast the direction of the share market from month to month and invest clients’ money accordingly.

This is not the reality, of course. Investments are only one small part of what your financial advisor can provide for you. Some of the key areas that we may be able to assist you with are as follows.

Knowledge is power

Consider for a moment the amount of newsprint, websites and broadcast time dedicated to financial topics these days. Australians seem to have an insatiable appetite for understanding finances.

Whether it's the latest share market activity, economic news or the constantly changing tax and superannuation rules, we can answer your burning questions and save you the hassle of finding it yourself.

Money and time

Sometimes the benefit you receive from a financial advisor can be spelt out in dollar terms. It might be the income tax you have saved by re-structuring your salary, or a new concession from the Australian Tax Office (ATO) or Centrelink that you didn't know you could get.

If you agree that time is money, then think about the time we save you when you make important decisions. If you had to do it all yourself, how would you choose the best super fund, investment options, or insurance cover? How frustrated would you be stuck on the phone trying to get regular information from government departments?

With all this confronting you, it's no wonder that many important financial decisions stay in the "too-hard basket". Remember, we deal with these things every day. We are in an ideal position to explain everything you need to know, and to simplify your options.

Personalised advice, every step of the way

The finance section of your newspaper probably includes a regular "advice" or "Q & A" column. By law, these columns must warn readers that the advice does not take into account your personal situation or needs and you should consider its appropriateness before acting.

In setting your financial strategy, we don’t use this "general advice warning" because we have taken the time to get to know you and your circumstances. This means that everything recommended to you—the investment portfolio, super contribution strategies, savings plans and insurance advice—is tailored to your personal needs, goals, and tolerance to risk.

As the years go by, some of your financial strategies will need adjusting due to changes in the broader environment or something closer to home. Whatever the case, we are there to help you make the most of the good times and the bad.

And meeting us for a review doesn't always mean major changes, but at least you'll know that you're on the right track – and you’re not alone.

Disclaimer

If you would like to meet one of our advisors to discuss your financial position and to see what a financial advisor's role is and how we can help you then please do not hesitate to contact our office.
Call Leenane Templeton on (02) 4926 2300 or email us.
 

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Retirement is a life-changing event. After you stop working, you can find yourself with time to do the things you may not have been able to do before, like travelling, volunteering or spending more time with family and friends so making the most of your retirement income is essential.

As you adjust to this new lifestyle, you'll also need to think differently about your finances. In retirement, your priority typically changes from saving, in preparation for when you leave the workforce, to carefully spending those hard-earned savings. It's likely that your initial focus will be to find a way to replace your salary or wage with cash flow from other sources.

The composition of your retirement income requires careful planning. Your retirement income may come from more than one source.

Age Pension

The Age Pension is an income support payment offered by the Government to older Australians who meet the relevant eligibility criteria. 

With maximum payments of $21,912.80 p.a. for a single pensioner and $33,035.60 p.a. for pensioner couples (including the Pension and Clean Energy Supplement and current for the period 20 March 2014 to 19 September 2014), the Age Pension probably won't be enough to afford most people a modest post-work lifestyle of basic activities, let alone a comfortable lifestyle.

To afford even a modest lifestyle in retirement, many people will need to supplement the Age Pension with other income. This could come from an annuity, an account-based pension or other investments.

An annuity (from within or outside super)

An annuity is a simple, secure financial product that guarantees a series of payments, for a fixed term or for life, in return for an upfront investment. The earning rate is fixed at the outset, and this applies for the length of the annuity, regardless of share market movements or interest rate fluctuations. Capital can be returned at the end of the agreed term or gradually during the term of the annuity as part of the regular payments.

An account-based pension (from your super)

An account-based pension is an investment account which gives you the ability to choose from a range of investments and can vary from time to time with the level of income you wish to draw subject to the minimum annual withdrawal amounts set by the Government. Account-based pensions are usually market linked. This means that the capital value is linked to the performance of the underlying investments, which can impact the level and duration of your savings and the income produced. Account-based pension providers, which may include your super fund, charge management and/or administration fees for these products. This reduces your investment returns.

Other investments

These are just some of the types of investments that can sit within your super fund (personal or self-managed superannuation fund) or outside superannuation.

• Term deposits are fixed term, fixed interest savings account. Terms generally range from one month to five years.
• Shares pay income in the form of dividends. You can invest in shares directly or via managed funds.
• An investment property is real estate which has been purchased with the intention of earning a return on the investment, either through rent, the future resale of the property, or both. Another type of property investment is a property trust, which is a managed fund that enables investors to pool their money to purchase an interest in a portfolio of real estate assets.

Income from various sources can be 'layered' to meet your income requirements. This can be set up so that more secure income, such as from the Age Pension or an annuity, can cover your essential costs of living, while your income from other sources can fund your discretionary spending.

This approach can also allow your more growth-oriented assets to remain invested, giving them time to grow.

Source: Challenger, May 2014

Disclaimer

Since each person is different, there is no single retirement income solution. More than one investment strategy and product may be required so it's important you receive professional help from your financial planner. It can make all the difference to your financial success in retirement.

Please call our email our expert team today!

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There are a few common financial planning strategies that may be appropriate for businesses and individuals looking to take control of their finances and plan for the future.

Concessional contributions.

The contributions cap for concessional contributions for those aged over and under 50 is $25,000 for the 2012/2013 financial year. Those which have exceeded this limit will face a penalty tax of 31.5%, in addition to the 15% tax payable on contribution. The excess concessional contributions also count towards the non-concessional cap. For those aged 65 or over, they must first satisfy a work test in order to make super contributions.

Government co-contributions.

There are government incentives in place for making after-tax contributions to super, with the government co-contribution scheme designed for low to middle income earners earning up to $46,920 (2012/2013). For those who have made an after tax contribution and are earning up to $31,920, the government will contribute up to a maximum of $500 tax-free into the super fund. For example if the non-concessional contribution  is $800 for someone earning up to $31,920, then the Government will contribute $400, representing an instant return of up to 50% on contributions.

The amount the government contributes decreases by 3.33c for every dollar above the $31,920 and cuts out at $46,920. It is exempt from being included as income in tax returns.

Spousal contributions.

Making an after-tax contribution to a dependant spouses’ superannuation account can result in a tax offset, provided that the spouse is under 65, or up to 70, provided they are still working.

Those who contribute at least $3,000 to the spouses’ account are eligible for the full tax rebate of $540, as long as their spouses’ assessable income is less than $10,800 for the year. If less than $3,000 is contributed then the rebate will be equivalent to 18% of the contributions.

If the spouses' income is higher than $10,800, the rebate decreases until it is capped if the income exceeds $13,800 a year.

Contact our friendly expert staff for further information TODAY!!!

Please read our disclaimer in relation to this article

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A tax deductible way to manage risk

Income protection insurance is an essential part of any financial plan, designed to secure your family’s lifestyle in the event of illness or injury.

Income protection insurance premiums are generally tax deductible, so if you purchase income protection insurance and pay your annual premium before 30 June 2013, you may be able to include the deduction in this year’s tax return. Business owners may also be able to claim deductions on their business insurance premiums.

Splitting income with your spouse

Investing in your spouse’s name can reduce, or even eliminate, the amount of tax paid on the investment income. This is true if your partner has a lower marginal rate of tax or is earning less than $20,542 pa.¹
 

Splitting income with your partner can be as simple as having your cash reserves (excluding your everyday bank account) in the name of the partner with the lower marginal tax rate.

Private health insurance

The Government has made significant changes to the Medicare levy surcharge and the private health rebate from 1 July 2012. If you are currently paying the Medicare levy surcharge, you should consider taking out Private Health insurance before 30 June to avoid paying the surcharge again.

Even though you might have private health insurance, you may find, based on your circumstances and income, your private health rebate has reduced this financial year ending 30 June 2013. To ensure that you understand the full impact, contact your health fund for more details.

Keep your receipts

The most common reason why people don’t take advantage of tax deductions is simply because they don’t keep receipts. While keeping receipts for big ticket items is necessary, you don’t always need a receipt for the smaller items such as stationery and books. If the total amount you are claiming is $300 or less, you need to be able to show how you worked out your claims, but you do not need written evidence.

Claim your uniform

If you are a tradesperson or if you have to wear a uniform for work you might find the clothes are tax deductible or the laundry expenses are tax deductible.

Negative gearing

Negative gearing is another strategy used to manage tax liabilities. Geared investments use borrowed funds, therefore enabling a higher level of investment than would otherwise be possible. Negative gearing refers to the cost of borrowing exceeding the income generated by the investment. This difference may be an allowable tax deduction. If you borrow to invest in shares you may obtain imputation credits which can be used to further reduce the amount of tax you pay.

Pre-paying your investment expenses

Gearing (borrowing to invest) can be an effective way to achieve long-term lifestyle and financial goals. As an added bonus, the interest that you pay on your investment loan is generally tax deductible. If you have commenced a gearing strategy, or are about to set one up, pre-paying your interest bill for up to 12 months before 30 June 2013 may enable you to bring forward your tax deduction and pay less tax this financial year.

Capital Gains Tax management

If you have a Capital Gains Tax (CGT) liability this year, there are a few strategies that you could consider to reduce the impact. These can be complicated to undertake, so it is recommended that you speak to your financial planner for more information.

Use a capital loss to offset your tax

The timing of the sales of assets (such as shares) can greatly affect your tax position. If you sell an asset because it is no longer appropriate for your circumstances and incur a capital loss, the capital loss may be offset against any capital gain you have realised throughout the financial year allowing you to manage your CGT liability. If you don’t have a capital gain to offset, unused losses can be carried forward to offset gains in future years.

Stay in it for the long-haul

If you have purchased assets (such as shares or managed funds) during the market downturn and they have risen in value, you might rethink selling them. Otherwise, you may have to pay a lot of CGT.
 

A way to trim CGT is to hold onto the investment for more than 12 months. Since 21 September 1999, individual investors have been entitled to claim a 50 per cent discount on capital gains they make on assets held for longer than 12 months.

Delay any income

Thinking of selling off a profitable asset, such as shares or property? It may be worth deferring this sale until after 30 June 2013. In doing so, you will delay incurring CGT for another financial year. So while you will still need to pay the CGT eventually, freeing up short-term cash flow may be beneficial depending on your circumstances.

Consider different types of investment structures

Investing into different types of investment structures (such as insurance bonds or superannuation) can prove to be a taxintelligent investment. The investment income within an insurance bond is taxed at a maximum rate of 30 per cent, which provides a saving of 16.5 per cent for a high income earner (calculation: 46.5 per cent – 30 per cent) and withdrawals after ten years are tax-free. There is also no need to include investment earnings in your tax return while funds remain invested.
 

Insurance bonds offer a range of different opportunities from investing for children, wealth accumulation for high income earners to passing your wealth onto the next generation outside of your estate.

More money in your super

From 1 July 2013, the Superannuation Guarantee (SG), the mandatory super contribution your employer makes for you, will increase from 9 per cent to 9.25 per cent.
 

Also, if you are aged 70 or over, your employer is currently not required to make SG payments on your behalf. This will change from 1 July 2013, as this upper age limit that applies to SG contributions will be abolished, and your employer will be required to make SG contribution for you.
 

The increased SG rate will mean more in your super, but it could affect your take home pay depending on your terms of employment. If you receive a fixed salary package (including your salary and your employer’s super contributions), when your employer applies the SG increase you could experience a reduction in your take home pay, while your overall salary package remains the same.
 

However, if your salary is a fixed amount and your employer pays SG contributions on top of this, then your take home pay will remain the same and the increase in SG will be borne by your employer.
 

You should also remember that SG contributions are concessional contributions, so if you are making salary sacrifice contributions, you should make sure you don’t unintentionally breach the concessional contribution limit.
 

If you have any questions how this change to the rate of the SG affects your personal circumstances, speak to your financial adviser.

Salary packaging

Salary packaging is also known as a salary sacrifice arrangement. It is where an employee agrees to forgo part of their salary or wages in return for the employer providing them with benefits of a similar value. For certain industries (such as the medical profession and charities) or high income earners it can be an effective way to obtain tax savings, particularly if you are on the top marginal tax rate.
 

Some of the most common items that can be salary packaged include:
• superannuation
• motor vehicles
• expenses ‘otherwise deductible’ to the employee.

You should make sure any salary packaging agreement you enter into has a positive outcome in after-tax terms. Employers are not required to offer salary packaging to employees and it is wise to ask your employer what benefits you can salary package and speak to your financial adviser or accountant about the opportunities.

Salary sacrifice into superannuation

Superannuation can be a tax-effective investment. If you are an employee, you could look at contributing to superannuation through salary sacrifice, thereby reducing your taxable income. In the long term, salary sacrificing has many benefits as it not only helps to increase your superannuation savings but could also reduce the amount of tax you pay. You could even salary sacrifice your annual bonus into superannuation, but this needs to be arranged in advance with your employer.
 

If you decide to salary sacrifice into superannuation, this amount is taken from your pre-tax salary. Your employer will automatically deduct it from your salary and deposit it directly into your superannuation fund. As a result, your contribution will be taxed at a maximum rate of 15 per cent, as opposed to your marginal rate, which may be as high as 46.5 per cent (including Medicare levy of 1.5 per cent).
 

Additionally, the reduced salary amount that you actually take home would then become your assessable income for tax purposes. This may enable you to move down a tax bracket, reducing your amount of total tax payable. Even though the taxfree threshold has risen to $18,200 this financial year, most people will still pay personal income tax. The lowest possible rate of tax is 20.5 per cent (the marginal tax rate of 19 per cent plus the Medicare levy of 1.5 per cent) and most people will be taxed at 34 per cent (marginal tax rate 32.5 per cent plus the Medicare levy of 1.5 per cent). Placing surplus money into superannuation could save you 5.5 per cent (calculation: 20.5 per cent less contributions tax rate of 15 per cent) or 19 per cent tax (calculation: 34 per cent less contributions tax rate of 15 per cent).
 

For 2012/2013 the per annum cap on deductible superannuation contributions for everyone is $25,000. However, it is proposed that this will increase to $35,000 from 1 July 2013 for those aged 60 or more, and from 1 July 2014 for those aged 50 or more.² You should consider speaking to your financial adviser about how this may impact your retirement planning strategy.

Excess contributions

It is proposed that from 1 July 2013, excess concessional contributions³ will be taxed at your individual marginal tax rate, rather than the current excess contributions rate of 47 per cent, although the higher rate will still apply to excess contributions for the 2012/2013 financial year.
 

When topping up your super, you should also bear in mind contributions to other super funds you may have made or have been made on your behalf to ensure your contributions do not exceed the contributions cap, which is still $25,000 for everyone in 2012/2013.

Have you turned 65 during this financial year?

If you have turned 65 this year, it is your last opportunity to contribute up to $450,000 before 30 June 2013 by using the three year bring forward non-concessional contribution cap. Making personal after-tax contributions into super can provide your superannuation a boost. This is complex and you will need to talk to your financial adviser about the contribution rules.

Get your Government co-contribution

The Government co-contribution⁴ (of up to a maximum of $500 per annum) is one of the most straightforward and effective ways for you to increase your superannuation savings. Employees and self-employed people who earn between $31,920 pa and $46,920 pa may be eligible. If you are eligible, you may simply make a personal non-concessional contribution into your super before 30 June and the Government will match that contribution.
 

Self-employed contributors may also be eligible for the Government co-contribution until age 71. Just remember that you need to have personal non-concessional contribution in your account that you have not claimed as a tax deduction.

The new low income superannuation contribution

From 1 July 2012, employees and self-employed people earning up to $37,000 receive a refund of contributions tax on their concessional contributions which include employer contributions (and salary sacrifice contributions) or contributions claimed as a tax deduction into their super account. This will ensure employees and self-employed people are no worse off when receiving or making these types of contributions.
 

One of the best things about the low income superannuation contribution is its simplicity as you don’t need to make a claim for it. All you have to do is lodge your tax return and the ATO does the rest. This means your superannuation fund may receive up to $3,300 in concessional contributions and not pay any tax on them. It’s that easy but it is advisable to speak to a financial adviser about the best contribution mix for your personal situation.

Make a personal deductible contribution

Self-employed, non-working or retirees may find themselves in a situation where they can significantly boost their retirement savings, as well as reducing their taxable income by making a personal deductible contribution. The simplification of and changes to personal deductible contribution rules is one such opportunity.
 

For 2012/2013 the per annum cap on deductible superannuation contributions for everyone is $25,000. However, it is proposed that this will increase to $35,000 from 1 July 2013 for those aged 60 or more, and from 1 July 2014 for those aged 50 or more.⁵
 

Note: If you are self-employed, non-working or retired, you need to ensure that you will satisfy the eligibility criteria and you make your personal deductible contribution into superannuation before 30 June.

Spouse superannuation contributions

If your spouse is on a low income, you could receive a tax offset for making a contribution to your spouse’s superannuation fund, so long as their assessable income (including reportable fringe benefits) is less than $13,800.
 

However, to claim the maximum offset of $540, your spouse must earn $10,800 or less and you need to contribute $3,000 to their superannuation in the same financial year. Because it’s a tax offset, you would make a direct saving against your income tax liability.

Claim your medical expenses

This is available to taxpayers earning less than $84,000 who have net medical expenses in the year of income exceeds the current threshold of $2,120. The offset is calculated as 20 per cent of the excess of net medical expenses over the threshold.
 

For individuals with adjusted taxable income above the Medicare levy surcharge thresholds ($84,000 for singles and $168,000 for couples or families in 2012/13), the threshold will be increased to $5,000 and the rate of reimbursement will be reduced to 10 per cent for eligible out of pocket expenses incurred.

Your Medicare financial tax statement will help you work out whether you can claim the offset in your tax return. The statement shows you how much you have paid for medical expenses and how much you have claimed back from Medicare.
 

The Government will phase out the net medical expenses tax offset with transitional arrangements for those currently claiming the offset. The tax offset will continue to be available for taxpayers for out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019. This transitional phase out will coincide with the DisabilityCare Australia changes being fully operational and the aged care reforms having been in place for many years.
 

From 1 July 2013, those taxpayers who claimed the tax offset for the 2012/13 income year will continue to be eligible for it for the 2013/14 income year if they have eligible out-of-pocket medical expenses above the relevant thresholds. Similarly, those who claim it in 2013/14 will continue to be eligible in 2014/15.

Transition to retirement for self-employed clients

One of the common tax-effective retirement planning strategies for those aged 55 or over is to transition to retirement (TTR). A TTR strategy offers opportunities for wealth accumulation and tax efficiency, especially for those aged over 60, who can access a tax-free income stream.
 

There are two components to the TTR strategy:
• commence a non-commutable account based pension receiving between three and ten per cent of the account balance as an income stream
• making contributions into superannuation so that, including the pension, the overall net income remains unchanged.

TTR strategies are complex in nature and it is best discussed with a financial adviser to determine whether or not it is appropriate for you.

Exotic schemes

Be sure to seek independent professional advice before you invest in any of the more creative and exotic tax/investment schemes that emerge around this time each year. If it seems too good to be true, it probably is!

1 Based on 2012/13 tax scales and low income tax offset of $445 taken into account.

2 Draft legislation to enable this increase has been released, but has not passed through Parliament at the time of completing this flyer.

3 This change is currently a proposal only, no draft legislation has been released.

4 Draft legislation to enable this change has been released, but has not passed through Parliament at the time of completing this flyer. 5 Draft legislation to enable this increase has been released, but has not passed through Parliament at the time of completing this flyer.

Contact Leenane Templeton's Financial Advisers TODAY!!!
 

This flyer has been prepared by Lonsdale Financial Group Limited. ABN 76 006 637 225 AFSL No 246934.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.
Part of the IOOF group

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