Click here to download this month’s InScope newsletter [PDF]

Last week saw sharp falls in sharemarkets around the globe, leaving many investors feeling nervous or unsure. What happened last week, and what is the outlook going forward?

Click here to download your copy of Insight [PDF] and if you have any questions, as always, just contact Rebecca Newton Financial Planner on 08 6201 5755.

This fact file can help you prepare for the financial year end and sets out some things you can discuss with us.

Topics include:

• Supercharge your superannation
• ‘Salary sacrifice’ into super
• Get a government co-contribution of up to $1,000
• Spouse contributions
• Contribution splitting
• Insurance premiums
• Prepaying loan interest
• Investment related tax deductions
• Managing capital gains

Things to consider:

• Do I have a record of all my super accounts and contributions?
• Does my employer allow salary sacrifice contributions?
• What are my current contributions for this financial year?
• Can I make a spouse contribution?
• Did I make a contribution last year that I could ‘super split’ this financial year?

Click here to download the fact file [PDF] or if you have any questions then speak to Rebecca Newton on 08 6201 5755 and let Prestige Wealth Partners help you maximise your superannuation opportunities.

Proposed changes include:

• Relief for unintentional breaches of contribution cap rules;
• Higher pre-tax contribution caps for those at age 50 ;
• Reduced minimum payments for account-based pensions;
• Government co-contribution income thresholds;
• Reporting of employer contributions on payslips;
• Lower income earners to receive a boost to their
  pay packet;
• Removal of Entrepreneurs Tax Offset;
• Dependent spouse tax offset to be phased out for
  those under 40;
• Disability support pension changes;

Click here to download the fact file [PDF] or if you have any questions then speak to Rebecca Newton on 08 6201 5755 and let Prestige Wealth Partners help you maximise your superannuation opportunities.

What are SMSF borrowing rules?

The borrowing rules offer excellent opportunities for SMSFs to maximise earnings by allowing the funds to gear (borrow to invest) into a range of asset classes such as shares, direct property and other allowable assets.

At the same time, the rules do not allow SMSFs to borrow without restriction. For the borrowing to be permitted, it must be established via an arrangement that meets certain conditions. This makes it extremely important that you obtain specialist financial planning advice on your personal circumstances.

What are the borrowing arrangements?

Under the borrowing rules, an SMSF is exempt from the general superannuation borrowing restriction providing the borrowing arrangement ensures:

• Borrowed monies are used to purchase a ‘single acquirable asset’ or: are applied to expenses incurred in borrowing, acquiring, maintaining or repairing the asset, but not to improving the asset are used to refinance a loan.
• The acquirable asset is held on trust so the SMSF trustee receives the beneficial interest in the asset.
• The SMSF trustee has the right to acquire the asset after making one or more payments after receiving the beneficial interest.
• Any rights the lender, or any other person, has under the arrangement are limited to the rights relating to the acquirable asset.
• The acquirable asset is not subject to a charge other than that provided in relation to the borrowing.
• The acquirable asset can only be replaced in accordance with the rules governing replacement assets.

What is a ‘single acquirable asset’?

A single acquirable asset is defined as one that is not money and which the trustee is permitted to acquire under the fund’s rules. The legislation also extends the definition to include a collection of assets that are identical, have the same market value and are seen and treated as a whole.

For example, an SMSF can borrow funds to purchase (and later sell) a parcel of shares of the same class in a single company.

Other examples of a single acquirable asset include:

• a collection of units in a unit trust which have the same fixed rights attached to them
• a property on a single title
• a collection of economically identical commodities.

Replacement asset limitations

While an SMSF can replace an asset which was acquired through a loan (borrowing), it is limited to doing so only in circumstances that involve:

• shares or units in the same company or trust of the same market value
• shares or units in a different company or trust acquired due to a takeover, merger, demerger or restructure
• shares acquired through an instalment receipt arrangement
• certain arrangements relating to stapled securities or the replacement of units in a trust.

A borrowing arrangement that does not include an allowable replacement asset is prohibited and would not meet the requirements of the borrowing exemption.

It is important to note that property cannot be replaced under a borrowing arrangement and that any improvements to the property (regardless of how they are funded) could result in the creation of a replacement asset where the improvement materially alters the character of the property.

What can SMSFs borrow to invest in?

Providing an SMSF complies with its trust deed and all the relevant superannuation rules, it can borrow to invest in a single direct property or a parcel of shares in a single company.

Direct property investments can include residential and commercial property, and under the rules an SMSF can lease the commercial property to a fund member for business use.

Allowing SMSFs to borrow funds to purchase shares broadens the gearing opportunities beyond geared managed funds. At the same time, trustees considering gearing must weigh up the risks and costs of each approach.

While gearing into direct share investments offers potential to increase returns, it could also increase losses if share prices fall. When it comes to cost, an internally geared managed fund may be simpler and cheaper to establish.

Tread carefully

Trustees considering gearing within their SMSF should proceed with caution. Implementing a borrowing arrangement is complex and unless proper care is taken, trustees could end up being penalised for failing the borrowing exception and/or failing to qualify for valuable Capital Gains Tax and stamp duty concessions.

Prestige Wealth Partners can help you

Speak to Rebecca Newton and let Prestige Wealth Partners help you maximise your superannuation opportunities.

For more information about self managed superannuation funds – and any other form of superannuation investment product – please download the Borrowing Rules Fact Sheet provided by Financial Wisdom or contact Rebecca Newton using the form below.

Property assets continue to attract investor interest due to their appealing attributes and growth possibilities. While they are often considered to be a mainstay of an investment portfolio, there are a number of things to keep in mind when adding property to the mix.

Click here to download your copy of Insight [PDF] and if you have any questions, as always, just contact Rebecca Newton Financial Planner on 08 6201 5755.

Is your business protected?

Whether your business is structured through a partnership, company or trust, few have effective mechanisms in place for the transfer of equity and/or control if one of the owners is lost to the business due to death, total and permanent disablement, or critical illness.

In many cases the loss of a business owner from one of these events results in the demise of an otherwise viable business simply because there was no succession plan and funding agreement in place.

A business succession plan, incorporating insurance funding protects your investment and ensures the survival of your business should one of the business owners or key person die, become totally and permanently disabled or suffer a critical illness.

Who is a Key Person?

Most businesses have one or more key persons whose skill, knowledge, experience and leadership ensures the success of the business.  A key person in any business may generally be defined as one whose death, disablement or early retirement may have an adverse economic effect on the business.

It is important to identify these key people and to analyse and quantify the adverse affect that is likely to be suffered by the business in the event of death, disablement or illness.

There are three basic protection needs that typically apply to businesses:

Asset Protection

Not the physical assets but the key person or persons.

This protection provides your business with enough cash to preserve its asset base so it can repay debts, free up cashflow and maintain its credit standing if a business owner or loan guarantor dies or becomes disabled.  It can also release personal guarantees secured by the business owner’s assets (such as the family home).

Revenue Protection

A drop in revenue is often inevitable when a key person is no longer there. 

This protection provides your business with cash to compensate for the loss of revenue and costs of replacing a key employee or business owner should they die or become disabled.

Ownership Protection

The death of a business owner can result in the demise of an otherwise successful business simply because of a lack of business succession planning.  While business owners are alive they may negotiate a buy-out amongst themselves, for example on an owner’s retirement.  But what if one of them dies? 

Ownership protection can provide the continuing owners, or their nominees, with sufficient cash for the transfer of the outgoing owner’s equity to the continuing owners, should a business owner die, become disabled, or suffer a critical illness.

Speak to Rebecca Newton on 6201 5755 and let Prestige Wealth Partners help you protect your business future.

General Advice Disclaimer This article has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.

Aside from school fees, there are regular expenses such as uniforms, equipment, and excursions that can affect your budget significantly, and with tertiary education these costs might be around for more than 15 years!

A survey by Nexus found around 33% of parents say they are taking on extra work to pay for education, while 31% are returning to the workforce. A worrying 16% of parents say they are taking out loans to meet education costs, while 15% are moving house to realise capital for education costs.

The latest consumer price index figures reveal education is the fastest-rising expense facing Australian families.

Education costs jumped 5.4% over the past year. Secondary education had the biggest increase of 7.6%, due to teachers’ wage rises and other operating costs, while preschool and primary education costs rose 6.6% and tertiary education was 3.2% higher over the 12 months to the end of March this year.

Having the money available when children start school is a better option than borrowing to pay school fees. Paying interest on the borrowings can sometimes double the amount you would pay if you had saved the money.

The best option is to start early and save regularly.

You don’t need a lot to start investing for your children’s education, and by adding small amounts regularly over time the interest earned could see your initial investment become significantly larger.

For more information on how to save for your children’s education, please contact Rebecca Newton on 08 6201 5755.

General Advice Disclaimer This article has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.

“Making the right decisions regarding one’s financial future is paramount. Being able to seek out legitimate investment information and speaking to someone, who is able to give you independent and unbiased advice, is a critical ingredient in the overall scheme of things.

“When my wife and I arrived in Australia, we considered various financial advisers and eventually decided to settle on the credentials of Rebecca Newton.

“We are happy to recommend Rebecca and her company, to any couple or individual who is serious about their financial health and wealth. Rebecca is not pushy, she listens, gives great advice and always behaves in an ethical and professional manner”.

- Jackie & Clint in’t Veld

About Rebecca Newton

Prestige Wealth Partners is a financial planning practice based in the northern suburbs and established to provide a strong client focus delivered through high levels of personal services, Rebecca Newton and Prestige Wealth Partners provide a unique, consistent and cost effective financial planning service.

The initial appointment is complimentary and you are under no obligation to proceed.

Discover financial planning with a difference. Contact Rebecca today!

How do I act on my financial advisers recommendations?

Where do I start?

It is often explained that the client should be advised of the nature of the financial planning process at the beginning of the first appointment.

Prestige Wealth Partners outlines the six steps of the financial planning process.

Step 1 – Gather your personal and financial data

• Such as your occupation, details on your income and expenditure, debt level and additional information on past experience with investments and how comfortable you are with investment risk.

Step 2 – Identify your goals and objectives

Prestige Wealth Partners then identifies your goals and objectives considering issues such as:

• The income and asset levels you are seeking;
• Placement of your investments;
• Planned expenditure – e.g. upgrading your family home, new car, holiday etc;
• Protecting your occupational income wealth through adequate death, disability and income protection cover;

Step 3 – Identify any financial issues

• We make comparisons between where you are now financially and where you want to be.
• Where a comparison indicates your objectives are unrealistic it is necessary for you to determine whether you want to modify your lifestyle to suit your goals, or modify your goals.

Step 4 – Prepare a Statement of Advice (SoA)

• We prepare a document that provides written recommendations relating to your goals, objectives and Risk Profile, such as recommended strategies and any actions necessary to correct shortfalls.

Step 5 – Implement your Statement of Advice

• Once you sign the Authority to Proceed your adviser can implement the advice on your behalf, or assist you through the process.

Step 6 – Reviewing your financial plan

• Is the advice/strategy still appropriate to meet your goals?
• To ensure it stays up-to-date and relevant to the economic climate and your changing lifestyle a minimum of an annual review is essential.

For more information

Please contact Rebecca Newton using the form below or telephone 08 6201 5755

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