Author: Alan Preston Archives

The Need for Demystifying SMSF Myths

dirty politics At the risk of facing adverse and unintended consequences, myths around the tax status of self-managed superannuation funds or SMSFs are being perpetuated, according to Chartered Accountants Australia and New Zealand superannuation specialist, Liz Westover.

She pointed out that the SMSF industry has had to get rid of the myths and misconceptions that surround the SMSF, including those that say that the SMSFs operate under special tax laws.

Misconceptions like these are being continued or spread by people who should know better. The myths also gained momentum because the flow of funds into the SMSF sector has been a concern for some of the larger funds for some time now.

Westover points out that there are no special tax laws for SMSFs and that the tax rules are the same for all superannuation entities.

One of the advantage of the SMSFs is they were able to manage the rules more efficiently than their larger counterparts and they cited the example of sale of assets for capital gains tax purposes or the timing of investment transactions with pension commencement.

In an adverse outcome of the continued myth surrounding SMSFs, people are driven to establish SMSF or to make enquiries about SMSF simply because of the tax reasons.

Read the article here.

What do I think about this?

The myths surrounding the SMSF, or at least any myth surrounding money, can be very misleading and oftentimes, it can lead to serious consequences whenever they are listened to and accepted on face value. Let’s face it. Retirement income is a very serious topic for discussion even at the early age of 30 and 40 years old because you don’t want to retire broke.

But the thing about these SMSF myths is that they not only mislead people into getting one but they also make SMSFs look bad. This is why whenever I talk to people about getting an SMSF, I make sure to clarify these myths or issues surrounding them.

Fighting for SMSF Lending

The MFAA convened a group of influential stakeholders to represent the financial services industry as Treasury takes a look at the key aspects of the SMSF sector.

The MFAA sought for support from the Financial Planning Association of Australia or FPA, the Association of Financial Advisers or AFA, and the Commercial Asset Finance Broker Association or CAFBA for its submission to the Financial System Inquiry.

A joint response that engages with these industry bodies should boost the impact of the submission significantly, the MFAA said.

Providing the government with a comprehensive submission from the broader industry is more important than small multiple submissions that the government needs to decipher, according to MFAA chief executive Siobhan Hayden.

In demonstrating an industry unity and support for initiatives currently under review, there’s no better idea than to have a shared voice.

The initiative of the MFAA to unite the other industry bodies comes after former MFAA president and Bernie Lewis executive chairman Mark Lewis told The Adviser last year that industry groups representing financial planning, mortgage broking and accounting must form deeper and stronger relationships to help with the convergence of the professions. In his statement, a deeper relationship needs to be built with the accounting associations. A mutual respect that needs to be found between associations and some communication from each of them to their membership that convergence is happening and that associations are working together to help facilitate the convergence.

He also adds that mortgage broking faced the biggest challenge, as compared with planning and accounting, when it comes to being viewed as a professional industry.

Check the rest of the article here.

What You Need to Know about SuperStream

What is SuperStream?

SuperStream is a new standard that requires all super contributions to be made electronically with linked data and payments. The changes will allow contributions to be treated in the same way – regardless if an employer sends them to a default or choice fund, including an SMSF.

SuperStream started to gain momentum by focusing on medium to large employers, or those with 20 or more employees, in the late 2014. These employers were required to have an implementation plan in palce and to ensure that they are SuperStream compliant by no later than 30 June 2015.

Smaller employers are also being encouraged to begin preparation for the SuperStream, which starts for them on 1 July 2015. Those that began earlier can already enjoy the benefits sooner.

Reducing costs and complexity

SuperStream’s benefit is that it reduces the cost and complexity that many employers face when they make super contributions. This means that they can use their payroll system to generate contributions as single event and send them through a single electronic channel.

The early signs of success from employers who already used SuperStream are visible and a few of them even noted how making a super contribution through SuperStream would now take them no longer than 10 minutes as opposed to the traditional method that usually takes about half a day. Other employers spoke about how using multiple formats was an inconvenience for their office because some were made through paper and some through electronic. But after they used the ATO’s Small Business Super Clearing House – a free service for employers with 19 or fewer employees, they were able to make contributions at once and at the same time, thereby meeting SuperStream requirements.

How to prepare

For SMSFs:

Contributions sent to an SMSF from a related-party employer are exempt from SuperStream and can be made using existing processes. For all the other SMSFs, you can get an electronic service address and provide this along with your SMSF’s ABN and back account details to your employer.

SMSF trustees need an electronic service address in order to receive contribution remittance information. You can get this from an SMSF messaging provider. The ATO has a register of service providers on their website. This is very easy to set-up and takes less than 5 minute to complete. Trustees can also find low-cost or free options available in the market. Don’t forget or don’t delay in providing your fund details so your employers can make changes in their payroll system. You need to wait for at least 60 days before your employer plans to start making SuperStream contributions.

On a broader note, businesses with 20 or more employees should have progress on their implementation plan. For those with 19 or less, they should try to talk to their bookkeeper, accountant payroll provider or major super fund and check what solutions they need to avail of so they can be SuperStream ready.

Employers should note employees who’re already members of an SMSF and they should be reminded to provide them with SuperStream information for their payroll records, including the SMSF’s electronic service address, ABN and bank account details.

SMSF Trustees May Live Longer than Average Aussies

An interesting research says that the SMSF trustees are likely to outlive an average Australian by 2.5 years (female) and 3.2 (male) years. While higher life expectancy may be a cause to cheer, it is also important to live out one’s age in fine fashion. This, however, is not possible unless the SMSF trustees have enough money in their kitty to tackle the post-retirement years.

Are You Losing Retirement Funds from Super Fees?

losing retirement funds According to a research from ING Direct, retiring Australians could lose as much as $190,000 from their superannuation savings due to the fees that have been imposed over the course of their working lives.

Retirement is a wonderful thing

Retirement should be a wonderful milestone in your life because it gives you the well-deserved from almost X number of years working without having to worry about your financial security anymore. These are the days that will be spent in the house, the beach, the cruises, or even in the mountains without worrying about deadlines, reports, and other pertinent matters related to work.

But retirement is more than just leaving your job after X number of years to call it quits. For the elderly, it’s important that they get to manage their superannuation correctly if they want to live a worry-free life. There are more than 600 super funds in Australia, and with the variations, super fees and performance can differ from one fund to another. Rate City representative Jeremy Willer says that there are 5 or 6 different types of fees, so it’s difficult for the average Australian to determine what they’re being charged.

What super ranks as the best and the worst?

Analysts from super experts Rate City found that the lowest charging fund was ANZ Smart Choice Super. They gave you a 12.83 per cent return with $300 in annual fees. Talk about a bargain.

But it’s also important to choose supers based on performance as well as fees. In terms of best performance, Rate City chose The Portfolio Service due to its 15.84 per cent return despite having a thousand-dollar annual fee. For worst performer, Optimum Professional bagged the title because of its outrageous $1300 annual fee with a low return rate of 7.4 per cent.

Taking control

Retirement is something that needs to be taken care of even before you reach that point. People need to be aware of the super funds that they invested in and pay attention to how much they’re gaining in exchange for how much they’re paying.

Australians pay as much as $20 billion in fees every year, or roughly an average of $1300 each. This is three times the average of what you would usually pay in other countries.