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SMSF trustee investment strategy checklist

SMSF trustees have the freedom to invest as they choose to grow their retirement savings, which is why it is vital that they check in on their investment strategy regularly. Maximising your retirement nest egg depends on how well your investment strategy functions at different phases in your working life. This is why your investment strategy should shift according to your changing financial circumstances. A new job, fluctuating markets, changes in tax laws or your retirement drawing closer may mean it’s time to switch up your investments.

Here is a checklist to get you started.

  • Map your risk profiles
  • Consider circumstances including risk, diversity, liquidity and member’s circumstances
  • Take out insurance for members
  • Confirm all fund investments comply with super laws and are allowed under a trust deed
  • Plan to regularly review your investment strategy
  • Document any decision about investment strategy

Posted on 20 November '18 by , under Super. No Comments.

Trustee reporting obligations checklist

Trustees must comply with reporting obligations to avoid penalties from the ATO.

The following trustee reporting checklist to make sure you are stress-free at tax-time.

Trustees must:

  • Value the funds’ assets at their market value at 30 June
  • Pay any minimum annual income stream payments required under super laws
  • Get an actuarial certificate if required
  • Prepare the fund’s end of year financial accounts and statements
  • Appoint and approve a SMSF auditor not more than 45 days before the SMSF annual return is due
  • Lodge your SMSF annual return by the due date
  • Lodge your transfer balance account reports if required
  • Review the fund’s investment strategy and document the review
  • Maintain all the fund’s records as required under super law

Posted on 8 November '18 by , under Super. No Comments.

A checklist for setting up your SMSF

Setting up an SMSF can be complex, which is why a checklist is useful to streamline your process. Before you set up your SMSF, first determine if having an SMSF is a commercially viable option.

Once a decision is reached and you are about to start your SMSF, here are the basic steps to get things started:.

  • Determine which members will be in your fund?
  • Decide if you will you seek professional help to assist your set up?
  • Decide whether the fund should have individual trustees or a corporate trustee
  • Establish a suitable trust and trust deed
  • Register your fund with the ATO
  • Set up a bank account
  • Prepare an exit strategy
  • Get an electronic service address so the fund can receive contributions from employers

Posted on 30 October '18 by , under Super. No Comments.

ATO update: Check for $17.5 billion in lost super

The ATO’s new data revealed that although the total amount of lost and unclaimed super reduced by $420 million in 2017-2018, there is still $17.5 billion left to be found.

The ATO has prioritised reuniting people with their lost super spread across over 6.2 million accounts. In the past financial year, the ATO was successful in merging $3 billion into active super accounts across the country.

Typically people lose contact with their super funds when they change jobs, move house or forget to update their details. Although some people may intentionally maintain multiple accounts, those who are unaware they have an inactive account may not realise that fees are possibly eroding their super. You should remain engaged with your super fund throughout all stages of your career so you can maximise your retirement nest egg.

You can view your super account details, including lost or forgotten accounts, by linking your myGov account to ATO online services. If you are unsure whether consolidating your super is the best option your super fund can advise you on issues such as insurance that may be attached to your accounts.

Posted on 26 October '18 by , under Super. No Comments.

Event-based reporting framework for SMSFs

The event-based reporting (EBR) framework for self-managed super funds (SMSFs) commenced on 1 July 2018. The initiative allows for the administration of the Transfer balance cap (TBC). Under the EBR framework, you need to report to the ATO, when the first member of your SMSF begins a retirement phase income stream.

The SMSF annual return is to be kept separate from the transfer balance account report. The TBAR enables the ATO to record and track an individual’s balance for their TBC and superannuation balance.

The ATO does not provide ‘special circumstances’ discretion for contraventions of the TBC which is why SMSF trustees and members self-monitor to ensure that members do not exceed their TBC.

Events to report
Your SMSF must report events affecting a member’s transfer balance including:

  • Details of pre-existing income streams (including value and type) being received on 30 June 2017 that continued to be paid to them on or after 1 July 2017 or were in retirement phase on or after 1 July 2017
  • Details of new retirement phase and death benefit income streams including value and type (when a death benefit income stream is reversionary, the start date will be the date on which the member died)
  • Details of limited recourse borrowing arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered on or after 1 July 2017 and the payment results in an increase in the value of the member’s interest that supports their retirement phase income stream
  • Compliance with a commutation authority issued by the Commissioner
  • Details and value of personal injury (structured settlement) contributions
  • Details and value of commutations of retirement phase income streams that occur on or after 1 July 2017

Exclusions

  • Any pension payments, or investment earnings and losses made on or after 1 July 2017
  • When an income stream ceases because the interest has been exhausted
  • Death of a family member
  • Information individuals report to the ATO using a Transfer balance event notification in the event of family law payment split, a debit event from fraud, dishonesty or bankruptcy and structured settlement contributions made before 1 July 2007

Posted on 19 October '18 by , under Super. No Comments.

Managing risk in your SMSF

SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.

Consider the following risk management strategies:

Diversification
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.

Liquidity
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.

Posted on 12 October '18 by , under Super. No Comments.

Choosing the right super risk profile

Choosing the right super risk profile at the right time can drastically increase your retirement savings.

The following considerations will help you invest wisely when it comes to building your retirement nest egg.

Types of investment options
Your super fund should offer a range of investment options to consider. Here is what to know about each kind of option:

  • Aggressive options are high risk, and you may have to sustain significant losses hoping to maximise your return in the long-term
  • Growth options aiming for higher returns over longer terms may sustain some losses in poorly performing markets
  • Balanced options provide moderate growth but endure less damage with an economic downturn
  • Conservative options provide a lower return but are the lowest risk option

Picking the right option
The investment option right for you depends on your retirement goals, your financial circumstances and your attitude towards risk. Your timeframe for investment should be substantial if you are looking at high-risk options as you have a considerable opportunity to recover from any losses. As your income stabilises and your retirement comes closer consider shifting to a low-risk alternative to secure what you have built up. You may also want to look to your assets like your business or various properties that may also help you fund your retirement when assessing if you can afford to take a risk.

Posted on 5 October '18 by , under Super. No Comments.

3 easy ways to maximise your super

Superannuation is more critical than it has ever been. If having an ageing population has taught us anything, it is how managing money now can have substantial ramifications for your retirement plan.

Merge your super
Every super account you have comes with a set of fees. It is worth your while chasing down inactive accounts and putting all your super into the one account to reduce fees and maximise the investment benefits.

Salary sacrifice
If you can budget putting more of your salary away into a super account every month, you can reap multiple rewards. First, you can use the extra super payments to offset your pre-tax payments up to the current concessional contribution cap of $30,000 per year and after-tax contributions of $180,000. You can also build up your super while you can afford to.

Strategise
Your investment strategy should depend on the amount of risk you are willing to take. This will vary on where you are in your career. A growth investment option, which is high risk, might suit you if you are in the early stages of your career development. However, as your income stabilises to your goal amount, it might be wise to change super funds to a lower risk option that will protect your growing retirement nest egg.

Posted on 27 September '18 by , under Super. No Comments.

Paying super to different visas

Normally employers have to pay a worker super. However, this becomes confusing with the different visas that employees might be on. Some rules are listed below.

Paying super to temporary residents
Temporary residents working in Australia are eligible for super guarantee. When temporary residents leave Australia, they can claim the super paid as a departing Australia superannuation payment (DASP). This is provided that they meet the requirements where you must:

  • Be 18 years old or over (if you are under 18 you must meet the above conditions and work over 30 hours per week to be entitled to SG) and,
  • Paid $450 or more before tax in a month.

Employees working overseas
An employee sent to work overseas must be paid superannuation by their employer. The other country may require the employer or employee to pay super there as well if Australia does not have a bilateral agreement with that country. To gain exemption from the super payment in the other country, the employer needs to show the authorities in the other country a certificate of coverage gained from the ATO.

Employees not eligible for super

  • Non-resident employees, you pay for work they do outside Australia
  • Some foreign executives who hold certain visas for entry permits
  • Employees temporarily working in Australia who are covered by a bilateral super agreement. You must keep a copy of the employee’s certificate of coverage to verify this arrangement.

Posted on 24 September '18 by , under Super. No Comments.

Employer super obligations reminder

The Australian Tax Office (ATO) is reminding employers to check they are meeting their obligations when it comes to paying super to their workers.

To help you make sure you are meeting your requirements, consider this checklist:

  • Are you paying the correct amount?

You are required to pay a minimum of 9.5 per cent of their ordinary time earnings to their superannuation fund.

  • Are you keeping correct and up-to-date records?

It is important to maintain accurate record-keeping procedures, so you have evidence to prove you have been meeting your employer super obligations.

  • Are you paying super to all eligible workers?

Like your employees, some contractors you hire may also be eligible for super contributions.

  • Are you making payments to the right fund?

Unless a worker has not provided their details, you should be paying into their fund of choice instead of your default fund.

  • Are you making payments on time?

The ATO allows employers to make contributions quarterly. Always ensure you make payments on time as late payments can incur a superannuation guarantee charge, which is not tax deductible. When making payments on time, they are tax deductible against your business income.

  • Are you paying the right way?

It is important to send the payment and data electronically in a standard format (paying the SuperStream way). Your business may also be eligible to use the free Small Business Super Clearing House to distribute payments to your employees’ super funds.

Posted on 14 September '18 by , under Super. No Comments.