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?

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.

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.

There 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.

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.

So 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!

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.

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.

Who’s excited?? Budget night is fast approaching and it’s that time again where the all-powerful politicians decide the fate of us all through some tweaks or even major changes to the rules that this great land is governed by. So what’s in store this year – unlike every other year, there haven’t been too many early leaks which is making some economists, financial planners, accountants and other professionals very concerned.

While there has been talk of leaving the superannuation system alone for a while, it inevitably gets a change here and there and this year there is discussion about the possibility of movements on the contributions caps. This may indicate a reduction in the amount that you can contribute to super. There is also speculation around the taxation treatment of some contributions in or payments on the way out but nothing solid as yet; as any TV lawyer would say “its hearsay”.

There has also been speculation around the Transition to Retirement (TTR) pension. This pension was introduced to allow older Australians transition into retirement by reducing work hours without reducing income however there was a loop hole which allowed everyday working Australians over age 55 to utilise a strategy of cycling the money through super and receive a pension to gain a tax deduction meaning more money for you and less for the tax office. While this strategy has been known by the Government for a number of years, they have never done anything about this loop hole until now. And the whispers are that they may stop TTR pensions all together from budget night or at least for those who have not reduced their working hours.

These are not the only measures being discussed or those that will affect all Australian but just a quick example of items on the agenda. Budget night will also bring surprises in relation to tax, child care assistance, health, housing, Centrelink assistance, and much, much more. While many don’t take much notice of Budget night, almost all Australians will be affected by its outcomes.

Budget night is usually the 2nd week in May however with talk of a double dissolution election in July, budget night has been moved a week earlier – now May 3. In addition, previous history has shown us that some Budget night announcements take effect from when the Treasurer addresses Parliament at 7.30pm (AEST). Retrospective legislation has never been introduced, so it’s unlikely that any strategies implemented now will need to be unwound.

What does this all mean for you? Well, if you have plans to do anything with your money matters you should contact our office as soon as possible to get your strategy sorted.

So if you were intending on making that non-concessional contribution to super sometime this financial year, consider doing it earlier or if you were planning on starting a TTR pension, this might push you into getting advice today.

Call us and one of the guys will be able to chat about the changes, the impact it may have on you and your financial plan or you can organise for a full review to make sure you’re on the right track regardless of Budget night changes.

1 July 2016 is the date that new rules around holding collectibles in an SMSF come into effect and it has been noted that SMSF trustees should not expect a transition or leniency period. The legislation changes have been in discussion in some form or another for around five years, giving trustees plenty of time to make the relevant changes to their Fund assets.

The new rules relating to collectibles and personal use assets, such as artwork, jewellery, vehicles, boats and wine, restrict the storage of these items as well as placing additional requirements on protecting these assets. From July, collectibles cannot be stored in a private residence of a member or a related party. You can continue to store your collectibles in a premises owned by a related party as long as it’s not their private residence and is strictly forbidden to be displayed. You must also keep documented records on the reasoning behind your storage decision.

While we are on related parties, you can only lease collectibles to an unrelated party and the lease must be on arm’s length terms. And should you be selling the asset to a related party, it must be at market rates and have a professional valuation to confirm market price.  To be considered a qualified, independent valuer, they must either hold a formal valuation qualification or be considered to have specific experience or knowledge by their professional community.

All collectibles must also be insured in the name of the Fund within seven (7) days of purchase. Insurance must be maintained on the asset at all times while held by the Fund and cannot form part of another policy; such as a trustees personal home and contents insurance.

If your collectible assets within your SMSF cannot tick off the above, you may wish to consider selling the asset prior to the 1 July 2016 date to ensure that your fund remains compliant. It seems that many trustees have been employing this strategy as collectible assets made up $713 million (0.18%) of all SMSF in June 2011, which is a significant amount more than reported in June 2015, with only $389 million (0.07%) of the massive $590 billion assets held by SMSFs. Many believe the reduction is due to the discussions and subsequent implementation of new legislation resulting from the Cooper Review completed in 2010.

If you have collectibles or personal use assets within your SMSF and are concerned about complying with the new legislation, get in contact with the team at JBS prior to the July 2016 deadline to ensure you take appropriate steps to keep your SMSF compliant.

Travel or tinned beans?

Which choice would you make? And believe it or not, at this age, with time on your side, getting ahead financially is easier than you think.  If you are one who would choose travel over tinned beans, here’s three simple steps you can take now to set yourself up financially in the future – and skip the beans.

TIP 1: Set Financial Goals
Start with a bucket list, what are all the things you’d like to do throughout your life? Now sort them into timeframes. Pick one core goal per timeframe and each pay slip you receive, allocate money toward that goal. For example:

–    SHORT TERM (1-3 YEAR) GOAL: Go to New York for two weeks. Set up a savings account, contribute some every pay cheque.

–    MID TERM (7-15 YEAR) GOAL: Educate your children. Consider an investment such as an investment property, managed fund or share portfolio, contribute even a small amount from every pay cheque.

–    LONG TERM (20+ YEAR) GOAL: Have the choice to retire at 60. Make sure that your superannuation plan is the right one for you, considering fees, investment options, insurance coverage, and any other benefits. To have the ability to retire early, you might want to consider contributing funds to super above the legally required minimum amount (SG contributions) from your employer.

TIP 2: Pay Off Personal Debt
Paying interest is lost money. For example: If you have $3,500 owing on your credit card, paying 21.5% interest and are only making the minimum repayments of $70 a month – it will take you 90 years and 1 month to pay off and you’ll have racked up $27,050 in interest!  Even by paying a little extra each month, say $150. You’ll repay it in two years 8 months and only accrue $1,074 interest. Earn more, spend less or use savings to get rid of credit card debt ASAP so you can start focusing on your exciting goals ahead.

TIP 3: Choose Super Investing Options Wisely
You can choose how you invest and contribute to your super. Compound interest 101: Say you’re 25 years old and you can access your super when you’re 65 years of age. If you have $1,000 in your fund currently and are earning $65,000 a year, contributing 9.5% of your annual salary, being $6,175.  If you receive 5% returns, you’ll retire on $752, 979. If you receive 6% returns you’ll retire on $965, 941. If you receive 7% returns you’ll retire on approximately $1,250,000. We can’t change the timeframe with super but we can influence our rate of return. Always check what your agreed risk profile is. Whether you’re in a conservative (more cash, less shares, property) or high growth (less cash, more shares, property) investing option, it’s important to understand what assets make up your account and whether they will deliver the growth and income you require to meet your goals. But also remember that with greater potenital for growth is greater potential for loss so adjust your portfolio wisely based on your views.

You also have options to contribute on top of the legal minimum paid by your employer, contributing $1,000 per annum on top of employer contributions could result in as much as a $100,000 difference when you retire.

If you need help setting a spending and savings plan, reducing debt or would like more information around the investment options in your super, please contact our office today.

If you’re approaching retirement or looking to undertake a Transition to Retirement Pension you may want to consider whether to have a reversionary or non-reversionary pension.

A non-reversionary pension is an income stream paid to a superannuation member that ceases upon the member’s death.  Upon the member’s death, their benefits will need to be paid out of their super either as a lump sum or income stream. Under the super laws, the deceased’s superannuation can’t remain in their super account and must be paid out as soon as practicable.

With a reversionary pension, upon the member’s death, the pension will continue to be paid to a nominated reversionary beneficiary (e.g. spouse). In this case the pension does not stop upon the death of the deceased member, but continues to be paid to the reversionary pensioner. The only thing that changes with the pension is that when the pension is paid in the financial year following the member’s death, the minimum pension payment requirement is based on using the reversionary pensioner’s age.

For members of a self -managed super fund (SMSF), you need to make sure that your SMSF Trust Deed allows for a reversionary pension to be put in place and you must follow the procedures outlined in the Trust Deed to be able to access the pension.

You also need to have the relevant documentation completed to indicate your nomination at the commencement of the pension. This is required by all superannuation funds, including SMSFs that must satisfy their auditor and the ATO. For an industry, retail or other super fund, it will be their standard pension application forms with the reversionary beneficiary nominated. For an SMSF, the documents required are things such as the notification to your SMSF that you’ve commenced a pension, trustee minutes documenting the decision, and a pension agreement.

You need to take into consideration that you can’t nominate just anyone to be a reversionary pensioner.  The reason for this is that under the Income tax law, only certain people are eligible to be paid a pension. These allowable reversionary beneficiaries include a spouse, a child under 18, a child between 18 to 24 who is financially dependent, or a child over the age of 24 with a disability can be nominated.  With reversionary pensions you can only nominate one beneficiary.

A reversionary pension has many benefits such as ensuring your super benefits stay within the tax-free pension environment and most importantly an income continues to your surviving beneficiary to help them support their lifestyle.  However, a main disadvantage in receiving a reversionary pension is that in situations where a member divorces or separates from the reversionary beneficiary, the member will need to stop the pension and begin a new one and nominate a new reversionary beneficiary, which could come at a cost.

If the reversionary beneficiary decides that a pension is not the most appropriate strategy for them, dependent on the rules of the fund, they can choose to take the funds as a lump sum and pay the tax accordingly.

Feel free to contact the team at JBS to discuss your options with Reversionary or Non-Reversionary Pensions.

If you have ever changed your name, address or especially in today’s environment where you could change jobs several times throughout your working life, it’s easy to lose track of where you’re super is being paid. Having several super accounts could mean that fees and charges are reducing your overall super investment.

The ATO claims there is around $17 billion owing to account holders and therefore could be holding unclaimed super on your behalf. This happens when Super Funds transfer the balance of small inactive account directly to the ATO. This is still your super and you are able to claim and transfer it to your preferred super fund at any time.

There are two primary ways to find any lost or unclaimed super:

Australian Tax Office

AUSfund (Australia’s unclaimed super fund)

The first thing you should do is go to the Australian Tax Office’s online search tool or by calling 13 28 65.

To do a simple search, you’ll need to provide:

•    Tax file number
•    Full name
•    Date of birth

For a more comprehensive search of all your superannuation, you’ll need to register for a secure login with the ATO.

Beware of companies or individuals trying to make money from you unclaimed funds. If you receive a letter or phone call advising you of unclaimed funds, there is no need to take advantage of their service.

Before making any decisions to close any super accounts speak with the team at JBS as you could be losing access to any insurance in place within the super or other benefits such as access to reduced home loan rates or lower fee structures.

If you would like to know more about unclaimed super please speak to the team at JBS.

Bring on 2016 – the JBS team have all enjoyed some time off and are now ready to kick start the year.

For many of us, the start of a new year allows us a fresh start, a new beginning or a clean slate. This time of year also presents a great opportunity for you to review your financial strategies and goals.

Financial reviews should take place regularly when you have the opportunity to make informed decisions and factor any changes into your financial plan. Below are some simple tips to tidy up your finances for the year ahead.

Have your key financial goals changed?
Our lives are not constant and our goals change slightly (or greatly) from year to year. Also, major life events such as serious illness, the birth of a child, inheritance, marriage and the death of a parent or spouse can all result in significant changes to our wealth management goals.

Prioritise your goals
It is important to rank and prioritise goals and decide in what timeframe you want to achieve them. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

Short, medium or long term?
Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium term goals typically require two to five years, and long-term goals usually take longer than five years.

If your financial goals have changed, how will this affect your financial strategy?
This is where the advice of a financial adviser is critical. Advisers have the tools and knowledge to create projections that take into account changes to your goals and changes to your timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

Be savvy
Make sure that your investments and level of protection support your level of risk and your goals.

Be sure to contact the JBS team if any of your circumstances have changed to ensure you are on track to reach your financial goals.

JBS would like to wish you a fabulous year ahead and hope that you are sticking to all those resolutions and goals you have set yourself for 2016.