Tag Archives: Superannuation

Success in Retirement

Regarding preparation for retirement, the terms ‘create,’ ‘protect’ and ‘enjoy’ encompass a variety of challenges; however, the acknowledgement of these challenges, and the subsequent methods of dealing with these problems can lead to success in the future.

 

The following two tables which show the lump sum requirements for both couples and singles when taking into account lifestyle upon requirement.

 

According to “The 2017 ASX Investors Survey,” the 2013/14 mean superannuation balances for households and individuals were $355,000 and $214,000 respectively; these figures, coupled with the data above, are indicative of some of the problems faced regarding ‘enjoy,’ as super balances somewhat dictate your quality of life.

 

Therefore, in order to ensure that enjoyment occurs upon retirement, creating wealth is imperative. The same ASX report states that 60% of Australian adults participate in at least one form of investment, however, the lack of activity by younger generations and engagement with their super contributes to lower super balances, across the board.

 

A global survey in “The Future of Retirement” report released in April 2017 by HSBC; indicates that only 34% of working aged people believe that they will be financially comfortable in retirement, whilst 58% thought that they will continue working to some extent in retirement because they have to.

 

In Australia the Superannuation system forces people to start saving for their retirement from an early age, however it still doesn’t ensure that these savings are working to their full potential.

 

These statistics further highlight the importance of seeking financial advice and putting a retirement plan in place from an early age because in our experience, clients who engage with an adviser will significantly improve their chances of being able to achieve your goals and enjoy their retirement.

 

At JBS, we run a Cash Coach and Retire Right program to specifically address these needs and help you to achieve the success you desire upon retirement.

 

– Richard Smart –



Worst Time To Invest

What if you only invested at market peaks?

 

Have you ever noticed that as soon as you buy an investment it tends to drop in value? Whilst this doesn’t really always happen, it just tends to be the investments we remember, what if it did happen? Even worse, what if it dropped by epic proportions?

 

tim

Meet Tim who is the worst market timer that has ever existed. What follows is Tim’s tale of terrible timing of his stock purchases.

 

Tim, fresh out of school, begins his career in 1970 at age 18. He understands the importance of investing and saving for the future and therefore decides to start allocating $2,000 per year into a savings account. It’s now the end of 1972 and he has saved up $6,000. Into the stock market it goes. Unfortunately for Tim, after watching the stock market go up and up over the last two years, over the next two years it drops 48%. Tim loses a bit of confidence in the market and while he doesn’t sell, he continues to save up his money in a bank account waiting for things to improve.

 

15 years later and Tim decides that now is the right time to put more money into the market. It has been going up for years and he sees no reason why it won’t continue. He invests his entire $46,000 into the market. After a small decrease the market then drops suddenly on the 19th of October dropping a whopping 27% in one day. Tim’s had enough, no more putting money into the market. He leaves what is already in there as what’s the point in selling now and goes back to saving in his bank account.

 

After ignoring the market for 12 more years Tim can’t avoid people talking about the internet. Everyone is making money from the internet. Unfortunately Tim knows very little about the internet but the media informs him that there are plenty of companies on the stock market that do. He takes his $68,000 that he has in the bank and jumps in but this time decides to not even look at the market for the next two years. 2 years later he checks his investment and it have once again decreased by 50%.

 

It’s 2007 and Tim is now 55. He’s looking to retire in 2013 and decides he’s going to have one last dig at this share market thing. He’s managed to save up $64,000 and into the market it goes. Little does Tim know that once again he’s picked a terrible time to invest, the GFC is about to commence with losses of over 50%.

 

That’s it, no more investing for Tim…..ever! Once again he leaves the funds in the market but saves up another $40,000 in cash before he retires. So what did he end up with at retirement?

 

Over his working life Tim has managed to invest $184,000 saving an additional $40,000 over the last few years in cash giving a total investment amount of $224,000. Sure he picked the absolute worst times to invest including the bear market in the early 70’s, the infamous one day crash in 87, the technology bust in 2000 and the GFC in 2007. But he never went back on his investment decisions; he never sold any investments.

 

table

 

Tim ended up with a total retirement balance of $1.1 million. While Tim was a terrible market timer, he was a good investor. He saved a regular amount on a regular basis no matter what. He didn’t panic when the market went down and sold his investment. Instead he maintained his investments until he needed the money. Finally, he invested for the long term and even though he pretty much picked the top of the market each time to put the money in, over time the market continued to go up in value, even if he had to wait a little while after the big falls for it to recover, it always did recover and then go on to meet a new high.

 

We are not recommending anyone follow Tim’s strategy. He didn’t include diversification in his investment product options and if he would have implemented a dollar cost averaging strategy where he contributed his savings amount each year no matter what, he would have ended up with over twice as much.

 

This is based on a study in the US, given US market investments however Australian markets felt the same crashes and still illustrates the importance of standing strong with your investment decisions. Time in the market is more important than timing the market.

 

So what can we take out of Tim’s fictional experience?

1.    Losses happen and are part of the deal when investing in the share market. It’s how you react to those losses that will determine your investment performance over time.
2.    Invest for the long term and let compound interest work for you.
3.    The biggest factors when determining growing your wealth are time, and savings amount. The effect of the actual returns the investments generate on your portfolio pale in comparison to how much money you contribute and how long you invest. Get these two things right, and the rest will follow.

 

If you are thinking about investing or want to learn more about how you can start your investment portfolio, contact one of the advisers at JBS.


Non-Concessional Contribution Changes

In our last CPE article we talked about the recent changes the government has made to the previously proposed non-concessional contribution life-time cap of $500,000.  To re-cap, the Government has back tracked on this proposal and has instead changed it to an annual cap of $100,000, with the ability to bring-forward 3 years’ worth of contributions from 1 July 2017. Your super balance must also be below $1.6 million to be able to make the contributions.

 

Since then the government has provided further direction on how the proposed bring forward rule and the $1.6 million cap will work.

 

Under current rules you can make a total of $180,000 in one year or $540,000 if you bring-forward 3 years’ worth of contributions. If you as an individual have triggered the bring-forward rule in FY16 and FY17, but you have not used it fully by 30 June 2017, transitional rules will apply.

 

If you trigger the bring-forward provisions in FY17, the transitional cap will be $380,000 (which is the current $180,000 cap plus the new $100,000 annual cap for FY18 and FY19). If you triggered the bring-forward rule in FY16, the transitional cap is $460,000 (current annual cap of $180,000 for FY16 and FY17, plus the $100,000 for FY18).

 

The below table provides an example of how this may work in specific situations, with example one and two outlining how the $380,000 bring-forward cap may work, and example three highlighting how the $460,000 cap works with the example contributions:

example-1

In relation to the $1.6 million eligibility threshold, you are unable to make further non-concessional contributions if your super account is above $1.6 million.  Your balance will be determined as at the 30th of June in the previous financial year.  If your balance is close to $1.6 million, you can only make a contribution or use the bring-forward rule to bring your balance up to $1.6 million without going over, this is summarised below.

example-2

As always these measures are not yet legislated and therefore could change yet again.  The draft legislation is expected in the next few weeks.

 

If you have made any non-concessional contributions in the previous three financial years and are concerned how this may affect you and your future contributions, feel free to contact any of the team here at JBS.


And Yet More Change

Last week, the Government made further announcements in relation to proposed changes to the superannuation system. From Budget night, we had a list of changes that they sort to bring in, however, after industry and community consultation, the Government have made changes to these proposed changes….confused yet?

 

cpe

Ok, well some of the main changes include:

–  The $500,000 lifetime cap on Non-Concessional (NCC) (after tax) Contributions has effectively been scrapped.

–  The $100,000 annual cap replaces the existing $180,000 annual cap for Non-Concessional (after tax) Contributions from 1 July 2017

–  The bring forward rules still apply, so an individual under age 65 can contribute up to $300,000 over a 3-year period

–  The current work test rules still apply for those over 65. This means they cannot contribute, unless working at least 40 hours in a 30 consecutive day period. The removal of the work test proposal has been scrapped until future notice

–  It is expected that the current $180,000 NCC cap still applies until 30 June 2017, meaning that you can trigger a bring forward provision in the current financial year and be able to contribute a maximum of $540,000 over the three (3) financial year period

–  From 1 July 2017, those with a superannuation balance of more than $1.6 million will not be able to make non-concessional (after tax) contributions to their super

–  The 5 year catch-up concessional contribution proposal, that would see those with a balance less than $500,000 able to access their unused concessional contribution cap to make additional before tax contributions to super, has been delayed until 1 July 2018.

 

The ultimate aim of the Government’s changes are two fold; (1) to avoid superannuation being used as an estate planning vehicle where people are saving their wealth in a tax free environment to pass to children rather than for retirement funding, and (2) to strengthen the idea of superannuation being a mechanism to provide an income in retirement, which includes supplementing the Age Pension.

 

We must note again, however, these proposals are not legislation and therefore could again change before they are enshrined into our super system, however it can assist us to forward plan your contributions and superannuation options better by providing a strong indication of what the Government is wanting to achieve.

 

If you are considering any large contributions to super or would like to discuss your personal situation and what these changes could mean for you, please contact us here at JBS.


Accessing your super before retirement

Ever get yourself in a financial spot of trouble and thought about taking money out of super to help? Well, generally speaking you can’t unless you’re retired but there are some limited instances where you can. They are limited to severe situations and you can’t just access the cash because you need a new car or the kitchen appliances need to be replaced.

 

Piggy BankThere are two ‘conditions of release’ (technical term for eligibility criteria to be able to access your super) for members to utilise under extenuating circumstances prior to retirement.

 

Severe Financial Hardship:
The first condition of release is Severe Financial Hardship. The rules around this condition of release vary depending on whether the member has reached their preservation age.

 

If the member has met the preservation age plus 39 weeks then they need to supply a letter from a government department showing the following:

•   At least 39 weeks of Government income support (like Newstart allowance) from the date the member met preservation age.
•   The member was not gainfully employed on any level on the date of the severe financial hardship application, and;
•   Evidence that the member cannot meet any reasonable and immediate living expenses; like you have missed your mortgage payments, can’t pay your electricity bill, however missing your repayment on your Ferrari won’t cut it.

 

If the client is younger than preservation age then the government department letter must show at least 26 weeks of government income support and evidence the member cannot meet their living expenses.

 

The amount that will be released also depends on whether the member has met their preservation age. The member can take their full balance if they meet the above criteria and are over their preservation age. If the member is under, then they can only withdraw between $1,000 and $10,000 in any 12 month period.

 

Compassionate Grounds:
The second condition of release is called Compassionate Grounds. Applications for this condition of release must be submitted to the Department of Health Services, as this condition applies to health related issues. SIS Reg 6.19A outlines what expenses they will release funds for:

 

•    Medical Treatment or transport;
•    To prevent bank foreclosure or sale of the member’s principle residence;
•    To Modify the members principle residence or vehicle to accommodate a disability; or
•    The pay for palliative care, death, funeral and burial expenses.

 

The member will need to supply evidence of these expenses to the Department of Health Services before a decision will be made. If the department comes back with a favourable outcome they will supply a letter for the trustee of the super fund stating how much can be withdrawn from the members account.

 

The member can apply for more than one of the above expenses at once. They will need to submit separate applications to the Department of Health Services with evidence of each expense.

 

These conditions are only available to members who are facing extreme circumstances.

 

So effectively, you have to almost be in dire straits (and I don’t mean the British rock band from the 80’s) to access super before retirement. Be warry of some providers that have touted that they can assist you to access your super early as these schemes are illegal and have been shut down in the past by ASIC however not until some clients have implemented the strategies and got themselves in trouble as trustees of their own super. Best way to look at super is that it is 100% a retirement savings plan and not an emergency or backup fund. If you’re concerned about your future and any road-bumps you may hit along the way, you may want to consider taking out insurances such as income protection or trauma cover so not to be disappointed when you cannot access your super for minor or short term issues.

 

If you have any concerns about your super or you want to look at personal insurances, why not give JBS a call to discuss your options.


Costs of Living in Retirement

Are you coming up to retirement? During the December 2015 quarter, the Association of Superannuation Funds of Australia (ASFA) issued new figures, which showed an increase in the costs of retirement. The average cost of retirement for people retiring at age 65 is approximately $59,236 per annum for couples and $43,184 for singles for a ‘comfortable standard of living’, both up 0.5% from the previous quarter.

 

Senior Couple Calculating CoinsSo then the question is raised, how much money do you need when you retire? It seems to be the age old question. Based on the figures released by ASFA, an average single retiree would require approximately $545,000 in super benefits in order to fund their retirement and couples would require around $645,000. But what do all these numbers mean to you and your retirement? Well, really all these numbers are just that, ‘numbers’. It’s important to understand that a comfortable lifestyle for one person may not be the same for the next.  Some retirees may require $100,000 per annum to live comfortably and others may only require $30,000.  One thing that is certain however is thecost of living will go up in the future and more importantly you will have to prepare for it.

 

Instead of worrying about the large sums of money required to retire on, it’s more important to have an understanding of the level of income you require once you’ve retired and work out from there how much you require in order to retire comfortably, taking into account your assets and other entitlements such as the Age Pension. A good starting point to determining how much you’ll need is to take into account your current living expenses. A common mistake here is most people will use the “off the top of my head” figures to determine expected living expenses. The issue with that is, often we under and over estimate expenses, which leads to very misleading results.

 

At JBS, we use technology to assist us to determine the exact expenses of our clients. This results in both efficiency as clients’ spend less time having to deal with their budgets and at the same time we attain very accurate information on our client’s actual living expenses. Once you’ve determined your living expenses, the next step is to review whether certain expenditures you’re paying today will still be payable once you’ve retired. Often these expenditures include your mortgage repayments, which we all want repaid as soon as possible, and work related expenses, such as commuting costs. Once retired, there’ll be of course no need to pay the tax man for income generated from employment and savings you’ve been putting away each month for retirement will also cease. It’s important that we capture all these points in order to get an accurate figure of your expected retirement expenses.

 

Take this example for instance.  Say you’re a 45 year old male, you’ve done your sums and calculated you’ll require $40,000 per annum in retirement. How do you then determine the following?

–   How much do you require to put into super each year to meet your retirement goals?
–   Will your super benefits be enough to fund your retirement expenses until your life expectancy?

–   When is your life expectancy?

–   How often should you review your retirement benefits to ensure you’re on track to meeting your goals?

 

From what you’ve read so far, we’d imagine you’re beginning to understand the complexity in determining how much you require to retire on.  The main point we wish to highlight is that you need to take time and be realistic with your budgeted retirement expenses. Know what your money goes on now (before your retire) so you can determine if you will spend the same in retirement. Doing all this yourself can become very complex and seeking professional advice is the best way to get an accurate estimate.  Having a professional on your side means there’s someone there to assist you in achieving your retirement goals by implementing different strategies to suit your needs. And more than anything, you don’t have to worry about your retirement as you’ve outsourced that!


Is Your Industry Super Fund Protecting You?

“It’s ok I have insurance cover through my super” is a popular response I get when talking to friends and family about the need for personal insurance cover. It’s true that most of us do in fact have personal insurance cover through our super funds, however have you ever taken a closer look at what you actually have?

 

Quite often, the default cover provided by industry super funds has absolutely no correlation with your needs and only provides minimal cover. Let’s take a look at Death / TPD and Income Protection a bit closer as these 2 types of insurance covers are the most common types of insurance policies offered by Industry super funds.

 

Protection

Income Protection
With income protection you’ll most likely find the automatic cover may have long waiting periods, up to 90 days (3months), which means claim benefits will not be paid until the end of the waiting period. The question you have to ask yourself is this, “can I sustain my living expenses for 3 months without an income?” If the answer is no then you really have to wonder whether the default cover through super is sufficient. Furthermore benefit periods on default covers are usually 2 years, which means in the event of a successful claim, you’ll only receive benefits for maximum 2 years. After this point the claim benefits will cease, which won’t do much good if you’re suffering from long term injury or illness.

 

In addition, as the money has to pass through your superannuation account, the benefits are basic in nature to ensure that it meets the strict rules on releasing money from superannuation, particularly when preservation age or retirement requirements have not been met. This may mean that you are unable to work but may not qualify for a claim.

 

Death and TPD
Depending on your age you may also have default Death and TPD cover. Great! This means your family is covered in the event of your death and or total disablement, right? Well, let’s take a look at the details. For example, if a 28 year old male was to open a new industry super fund, he may be entitled to approximately $150,000 – $290,000 of death and TPD cover. The amount of cover depends on his age and which industry super fund he is with. Even if we took the best case scenario and presume he receives the full $290,000 of default death and TPD cover, it still won’t do much good considering the average Australian Mortgage is now around $450,000. So if you’re the main income earner, how’s your family going to fund the outstanding loan along with the ongoing everyday living costs?

 

Furthermore it is very common for industry funds to have reducing cover policies. This means that as you age, the level of cover reduces, leaving you with minimal insurance cover when you need it most, which is usually in your later years.

 

Another important factor to point out is industry super funds do not offer full range of personal insurance cover. Trauma insurance which provides a lump sum payment in the event of serious injury or illness is not offered through your industry super fund. This is especially important to cover any out of pocket medical expenses, which are not covered through Medicare or your private health cover.

 

Here at JBS we often find new client’s misunderstanding what insurance covers they have through their super funds. It is then our focus to ensure our clients understand what insurance they have through their super fund, whether they are in fact the correct types of insurance they require and determine the correct levels of insurance to implement.

 

Personal insurance can become very complicated and needs to be looked at in depth. Aside from determining the correct types and levels of insurance cover, there are also other factors to consider such as determining the premium structure on the insurance cover. If you haven’t had a review of your insurance needs or it’s been a while since your last review, we encourage you to get in contact with us for a chat.


End of Financial Year Tips

Superannuation

The end of the financial year always seems to creep up on us. Understanding what you could do before and after 30 June can provide the icing on the cake for employees, investors and those in small business. When it comes to superannuation, make sure you maximise the tax deduction this year or salary sacrifice the right amount so you get the best possible outcome and don’t end up with tax penalties.

Concessional contributions are most commonly contributions from your employer, however if you receive a bonus or have additional cash flow and your marginal tax rate is more than 15%, salary sacrifice into superannuation can be a strategy to boost your super balance and decrease your tax. To receive the tax benefit in 2016 your fund must receive the contribution prior to 30 June 2016.

The current concessional contributions are:
Table
It is important that you don’t go over your limit.

Claiming a tax deduction for personal superannuation contributions
If you are self-employed, (you earn less than 10% of your income from wages from an employer, fringe benefits and other related payments) you may qualify for a personal tax deduction to superannuation.

If you intend to claim a tax deduction make sure you are eligible to claim a tax deduction – you may want to speak to JBS first to make sure.  You need to notify the fund of the amount you wish to claim as a deduction as soon as possible to ensure you have the relevant acknowledgement form from your super fund before you lodge your tax return.

Salary sacrificed contributions
Foregoing part of your salary in favour of having additional concessional contributions made to super by an employer may deliver tax advantages.

Existing salary sacrifice arrangements should be reviewed on a regular basis, at least annually. Reviewing a salary sacrifice arrangement before the end of the financial year and amending for the following financial year represents good planning and ensures that you do not exceed any caps resulting in additional tax.

Government co-contributions for low income earners
If you earn less than $50,454 a year and make a non-concessional contribution* to superannuation you may be eligible to receive a Government contribution of up to an additional $500. The actual amount, and eligibility for the co-contribution, depends on a number of factors including the proportion of total income derived from employment, taxable income (and lodging a tax return), age and level of contributions.

*Making large non-concessional contributions is a big decision and advice from a financial planner is recommended before any contribution is made. In the recent Budget, a lifetime limit of $500,000 was placed on non-concessional contributions and therefore it is even more important that you seek assistance before making any after-tax contribution to super.

Low Income superannuation contribution
The Government will provide a superannuation contribution of up to $500 equal to 15% of concessional contributions made into superannuation to eliminate tax payable on these funds when deposited into super. If you are earning $37,000 or less and your employer pays superannuation contributions to a complying superannuation fund you may be eligible for this contribution. You do not need to do anything to claim this payment, but rather the ATO will determine your level of contribution and make it directly to your super account once tax returns have been lodged.

Spouse contributions
If your spouse has an income of less than $10,800, you may be entitled to receive a tax offset of up to $540, if you make a non-concessional contribution to their super account. The tax offset reduces if your spouse’s income is between $10,800 and $13,800, when it cuts out. The maximum offset available is 18% of the contribution made, subject to a maximum offset of $540.

Personal and Investment

Claim all work related deductions
The task of compiling all work related deductions can seem all too hard. However, taking the time to understand what work related expenses are potentially deductible can save you considerable cost. Where you do not have the necessary receipts on hand you can still claim up to $300 of work-related expenses provided the claims relate to outgoings you necessarily incurred in your job or business.

Maximise motor vehicle deductions
If you use your car for work-related travel and your kilometres for the year do not exceed 5,000 kms, you can claim a deduction for your car expenses on a cents per kilometre basis. The allowable rate for such claims changes annually. Any such work-related travel claims must be based on reasonable estimates.

If you use your car for significant amounts of work-related travel you may be able to claim a deduction for your total running expenses to the extent you have used it for work. However, such claims are only available where you have the required log book, odometer readings and receipts.

Property deductions
If you have an investment property and some repairs are required, bring forward the works before 30 June. It is important the invoice is paid pre 30 June to be deductible in this financial year.

Improve your tax situation

There are many things to consider when it comes to your taxes. Here, we’ll give you just a few options to consider to improve your tax situation and explain the importance of your getting your taxation documents in order.

Defer or bring forward income for the current financial year
Consider deferring taxable income, until the start of the next financial year. For example, you may want to consider postponing the sale of assets which may incur capital gains tax. However, in some cases it might be advisable to bring forward income to the current financial year, particularly if your projected income in the next financial year is expected to result in you moving into a higher marginal tax bracket.

Pre-pay interest and tax deductible expenses
Pre-paying interest and tax deductible expense may allow the tax deduction to be claimed in the current financial year.

Tax documentation
It’s important that you keep all your tax documents in order. Review receipts, log books and other documentation to ensure that all records required to manage tax affairs are in order. This will help make the end of the financial year process run as smooth as possible.

Review Your Pension Drawings
If you’re drawing an income from an account based pension, also known as an allocated pension, check to ensure that the prescribed minimum level of income has been drawn in the current financial year. Failure to draw the correct minimum level of income may result in unfavourable tax consequences.

Ensure your SMSF is firmly on track

Managing your own superannuation fund gives you the greatest flexibility over exactly how and where your super investments are made. However, it also means that you are solely responsible for complying with super and tax laws. With the end of the financial year looming, now is as good a time as any to make sure your SMSF is on track.

Investment strategy
Each SMSF must have an investment strategy that reflects the high level investment strategy adopted by the trustees of the fund. As part of the investment strategy, trustees are also required to consider insurance for each member of the fund. In addition to formulating and implementing an investment strategy, trustees are also required to regularly review the fund’s investment strategy.

As we approach the end of another financial year, this presents a good opportunity for trustees to review their investment strategy and ensure that it continues to be appropriate for the fund, particularly where members’ circumstances may have changed.

Value assets
It’s a requirement that trustees of a SMSF value their fund’s assets at market value. This does not necessarily involve trustees obtaining formal valuations from a qualified valuer, however valuations must be provided by a person familiar with valuing such assets.

The JBS team are here to help, if you have any questions leading up to the end of financial year please contact us.


To Record or Not to Record

The retention of key documents is an important requirement for the trustees of self-managed super funds. In this day and age, technological advances have seen the ATO update their record-keeping requirements to allow for electronic storage.

 

What do trustees need to know about record-keeping?
The ATO, on its website, emphasises that it is the responsibility of the trustees to maintain records of documents in such a way that they are accurate and easy to access. This includes all tax documents and records of the super fund, especially minutes of all investment decisions ensuring that all trustees have acknowledged the decision and the reasons of the choice of investment are noted. This specifically ensures that any disputes between trustees over failed investments within the fund, should not occur since trustees cannot claim they were not involved.

 

What are the benefits of storing SMSF records electronically?
The ATO’s decision to allow the electronic storage of documents was primarily as a way to minimise the cost of running an SMSF, since it can potentially reduce the costs of maintaining the collection of records. Additionally, a well organised collection may help reduce the cost of any audits required.

 

Data storage. Laptop and file cabinet with ring binders. 3d

What are the negatives of storing SMSF records electronically?
There is a need to ensure that all documents stored electronically can be easily verified for authenticity and are easily accessible. In particular, unknown authenticity of documents held digitally may result in issues when lodging documents with the ATO. Keeping a copy of key documents without the originals may result in difficult questions regarding whether the original was destroyed for the reason other than to simply reduce paperwork. For this reason trustees should strongly consider whether to keep original copies of important documents. The loss of a trust deed, or the existence of one with questionable accuracy, for example, has potentially major implications in case of disputes between trustees, often requiring court decisions for solutions to be achieved.

 

For how long do documents need to be kept by trustees?
The ATO specifies the need to maintain various documents for various lengths of time.  Should any of these documents not be available within the time period then a penalty must be paid based on penalty points.

 

Records required to be held for at least five years:

–  Accounting records with the transactions and financial position of the SMSF (If not held, 10 penalty units must be paid)
–  Annual operating statement and an annual statement of the SMSF’s financial position (10 penalty units)
–  Copies of all SMSF annual returns
–  Copies of other statements required to be lodged with the ATO or provided to other super funds

 

Records required to be held for at least ten years:

–  Minutes of trustee meetings and decisions (10 penalty units)
–  Changes of trustees (10 penalty units)
–  Trustee declarations acknowledging the obligations and responsibilities for any trustee, or director of a corporate trustee, appointed after 30 June 2007 (10 penalty units)
–  Members’ written consent to be appointed as trustees
–  Copies of all reports given to members (10 penalty units)
–  Documented decisions about storage of collectables and personal-use assets

 

Ultimately the responsibility of retaining key SMSF records falls onto the trustees.  Should any doubts be predicted to exist over the authenticity of a document then care must be taken if making the decision to store SMSF records electronically.

 

If you’re receiving full service SMSF administration from JBS, you’ll be happy to note that we do all the recording of documents for you electronically, however we still keep a copy of the original documentation of key documents such as trust deeds, pension documentation and binding death benefit nominations. This allows easy access to documents for members, trustees, auditors, and the ATO. If you are running your own SMSF, make sure you adhere to all document storage requirements or alternatively, contact JBS to discuss how we can help.