Tag Archives: JBS Financial Strategists

Financial Agreements

Family law disputes are usually complex, often difficult to manage and generally a costly process. These days families come in all shapes and sizes and at some stage in your life, you may require advice from a family law specialist. Financial agreements are a way of avoiding costly (and often stressful) family disputes.

“Pre-Nuptials” and Financial Agreements

Family Law

Financial Agreements, also colloquially known as “prenups”, can be useful as a risk management tool for couples seeking to document how they will divide their property if they separate at a later time. It allows a private agreement to be formalised and precludes the later involvement of the Family Court. Having such an Agreement can therefore save a significant sum of money, including the costs associated with property settlement negotiations or litigation if the couple separate. It can be compared to income protection insurance or life insurance.

Financial Agreements can be particularly useful for:

1.    Mature couples with significant assets who have been previously married or been in a previous relationship and who are now entering into a new relationship. These couples may have children from previous relationships for whom they wish to protect their future inheritances;

2.    Young couples who are likely to be gifted or inherit significant wealth from their parents;

3.    Relationships where there are significant differences between what each party is bringing into the relationship.

There must be strict compliance with the legislation and there cannot be any form of duress applied towards a party to the Agreement. The parties must have provided each other with full disclosure of their financial circumstances. Each party to the Agreement must have obtained independent legal advice before signing the Agreement. People with complex business structures need to take particular care that they consider problems under any commercial contract with third parties. They also need to seek taxation advice as to any taxation implications. It is advisable for parties to review their overall financial planning or succession planning strategy when considering entering into a Financial Agreement.”

If you require family law advice or would like to set up a financial agreement contact JBS as we work with a number of family lawyers who would be happy to help.


SMSF Transfer Balance Cap Reporting

From 1 July 2017, superannuation fund members are subject to a $1.6 million transfer balance cap (TBC) which limits the tax exemption for assets funding superannuation pensions.


The TBC encompasses a significant amount of monitoring for an individual. This monitoring is to be facilitated by the Australian Taxation Office’s (ATO) event-based reporting framework.


Event-based reporting is a significant shift in SMSF administration processes. Therefore, it is essential SMSF trustees understand the event-based reporting framework and get it right.


Why events-based reporting?


Event-based reporting is required for the ATO to track an individual’s transfer balance account across all their funds including public offer and defined benefit funds and administer the appropriate consequences if an individual exceeds their cap


An SMSF is only required to report if one of its members has an event that impacts their transfer balance account, such as the ones listed below.


From 1 July 2018, time frames for reporting are determined by the total superannuation balances of the SMSF’s members:

– where all members of the SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its annual return is due.

– SMSFs that have any members with a total superannuation balance of $1 million or more must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.


What needs to be reported?


An SMSF must report events that affect a member’s transfer balance account, including:

– Income streams a member was receiving on 30 June 2017 that continued to be paid to them on or after 1 July 2017 and are in retirement phase.

– New retirement phase income streams.

– Some limited recourse borrowing arrangement payments.

– Compliance with a commutation authority issued by the Commissioner.

– Commutations of retirement phase income streams.


All SMSFs that were paying a retirement phase income stream at 30 June 2017 needed to complete and lodge a TBAR on or before 1 July 2018 to report the balance of each pension individually, for each member as at 30 June 2017.


An SMSF is required to report earlier if a member has exceeded their transfer balance cap, regardless if it usually reports annually.


Closing an SMSF and Roll-over to an APRA fund


If you are going to roll over a super benefit into an APRA-regulated fund and start an income stream you are encouraged to report the communication as soon as it occurs.


As APRA-regulated funds have a monthly reporting regime, waiting to report the roll-over can result in a double-counting of the member’s income streams.


How JBS can help?


For ongoing Full Service clients of JBS we remove this administration burden for you and work with our accountants to ensure that the TBAR reporting is met. For those who use an external accountant or an annual lodgement service it is critical to ensure that you understand your reporting requirements.


As always JBS are here to help so if you have any queries, please feel free to contact us.

Unexpected Facts About Retirement

For the majority of us, leaving our office desks forever is something we can only imagine about as it’s so far away. For the luckier ones that are much closer to retirement, this can be a time of excitement and relaxation. Spending our days at the golf course or with our community groups, families and friends all day every day sounds like heaven on earth. The transition from full time work to full time play however may become unbearable.


Here are 5 facts about retirement that you should be looking at before retiring.


1 – Time – One of the first things our clients discover about retirement is that they have too much time on their hands with nothing to do. Playing a round of golf with mates, or enjoying a drink at the bar will only fill up a certain amount of time in the day and you can’t go doing the same routine day after day. Couples and singles alike will quickly become very unhappy once they run out of ideas on what to do with their time. Having ideas in your head on what to do in retirement is one thing; however actually doing them is another. Some experts are suggesting retirees have a day to day plan on what they want to do and even seek a therapist leading up to retirement. You will never be as busy as you were pre-retirement so it’s important to map out ongoing hobbies, part time work and social events before embarking on retirement.


2 – Retired husband syndrome – Many couples get very excited about retiring together, travelling the world together and spending intensive time together. If this is you then consider the fact that you and your other half may have been together for the past 30 years working full time. Aside from weekends and holidays, you never have to see each other for more than a couple of hours in the morning and night. Now all of a sudden you see each other 24 / 7 and may even start to discover that you can’t stand being together for a prolonged period of time. A great plan is ensuring each of you have your own hobbies, goals and friends. As my mother often said to my father “I married you for better or worse, but not for lunch”.


3 – Not having enough money to fund retirement – Once retired you might have the goal to travel, see the world and complete your bucket list, unfortunately you might not have the funds to do so. Travelling can become very costly. A single international trip can set you back a lot more than you’ve budgeted for. By the time your second trip comes around you may find that you don’t have enough funds anymore, so eating out may be out of the question and this year you won’t be able to travel overseas to see your grandchildren. By speaking with the team at JBS early on we can help prepare you and set realistic goals for your retirement, putting in allowances for those additional goals that you want to tick off your bucket list. This way at least you have a more clear expectation of what you can afford in retirement and prevent any nasty surprises once you’ve retired.


4 – Entitlement to social security – Depending on what year you were born, the Australian Pension Age is at least 65 but is gradually increasing to age 67. During retirement some retirees aren’t aware of what social security benefits they’re entitled to. Even if you are receiving funds from your Superannuation benefits, you may still be entitled to government age pension (subject to income and asset tests). We will help ensure you’re kept up to date regarding any social security payments you’re entitled to and consider how we can structure your wealth to maximise these for you.


5 – Losing your identity from not being at work – For those of us who are passionate about our profession, this becomes our identity. Anytime your friends or family think of Engineer, Accountant or Doctor, they think of you. So it’s no surprise that once you retire you may feel like you’ve lost your identity, which may lead to discontent and even depression. Without the daily interaction of your work colleagues, your mental and even physical health may start to deteriorate. Retirees who are not very active tend to decline rather quickly mentally and physically. Joining up to the local gym, taking up classes and just continuing to meet new people will have a longer lasting affect for you. After all, we all need something exciting to look forward to in the future.


If you are one of the lucky ones thinking about retirement, make sure you talk to the team at JBS so there are no nasty surprises. Remember good planning takes time.

First Home Super Saver Scheme

Introduced as part of the 2017-2018 Federal Budget, the First Home Super Saver (FHSS) scheme aims to make housing more affordable for first home buyers. Essentially the FHSS scheme allows you to save money in your super fund that will go towards your first home.


If you are making either concessional or non-concessional contributions into your super fund, you will be able to apply to have your voluntary contributions, as well as associated earnings, released to help you purchase your first home. Since your concessional contributions are taxed at 15% as opposed to your marginal tax rate, the FHSS scheme can be an effective tool in helping you save for your first home.


When making a withdrawal from super to help purchase a home, you are able to withdraw total voluntary contributions of up to a maximum of $30,000 across all years, with a maximum of $15,000 from any one financial year. The contributions are ordered by a first-in first-out approach. For example, Joe has made $10,000 of eligible non-concessional contributions each of the past 3 financial years. He finds a house he would like to buy. He can withdraw a total of $30,000 to purchase the house as each year he has stayed within the maximum of $15,000 per year. If Joe had made eligible non-concessional contributions of $20,000 and $10,000 in the past 2 financial years, he would be limited to only withdrawing $25,000 (maximum of $15,000 from the first year and $10,000 from the second year).


Once your first FHSS amount has been released to you, within 12 months you must do one of the following:

– Sign a contract to purchase or construct your home – you must notify the ATO within 28 days of signing the contract
– Re-contribute the assessable FHSS amount (less tax withheld) into your super fund and notify the ATO within 12 months of the first FHSS amount being released to you.


There is a strict set of criteria you must satisfy in order to be eligible for the FHSS:

– You must be at least 18 years old when you request a release from your super account
– You must never have owned property in Australia (this includes investment property, vacant land, commercial property, a lease of land in Australia or a company title interest in land in Australia).
– You must not have previously requested the Commissioner of Taxation in Australia to issue a FHSS release authority in relation to the scheme.


You may be eligible for the FHSS even if you do not satisfy the above conditions. More details of this can be found here.


There is also criteria on what you cannot purchase through the FHSS and these include:

– Any premises not capable of being occupied as a residence
– A houseboat
– A motorhome
– Vacant Land


One thing to note is that just because it can be done, doesn’t mean that every super fund offers it so if you believe you are eligible and would like to explore it further, it would be worthwhile contacting JBS.

Suffering a Financial Hangover?

The holidays are great time for families and friends to get together to enjoy the warmer weather and sunshine together. However, this time of year is also when spending can go a little overboard and people end up with an overwhelming credit card debt.


Below are a few ways to get yourself back on track this New Year:


Sell, Sell, Sell
Selling items you no longer use is an easy start. You can make a dent in the amount you overspent during the holidays and you can also make a jump on decluttering your house. Try to sell in local areas to reduce the cost of shipping items. By grouping items together such as 10 x books or bag of kids clothing size XX for a set price reduces the time you spend advertising items and increases the chance of a quick sale.


Eliminate non-essential items
Small inexpensive items add up over the month. If you don’t purchase that morning coffee or afternoon soft drink you could potentially save yourself between $150-200 a month. Consider cheaper alternatives like taking your coffee with you in the morning and making your lunch the night before.


Stop Shopping
This time of year can be tempting to purchase in the post-holiday sales, but if you are already in debt you cannot afford the items no matter how good the deals are. Unsubscribing from e-newsletters offering sale items is a great place to start, if you don’t see the deals you can’t buy them. Ensure you don’t do your grocery shop when you are hungry and take a shopping list so you don’t impulse buy.


Make this year’s financial hangover the last, contact JBS today and we can help you give your finances that bright New Year feeling.

Proud to be an Adviser

I often get asked why I love being a financial adviser – well the answer is simple, I get to help our clients every day of the year. Along with my awesome team we are able to make such a difference in the lives of our clients whether it be when we get to help them retire, hold their hands when something goes wrong in their lives or be at the end of the phone when the markets get the wobbles.


Being an adviser comes with a huge amount of responsibility, that we often take for  granted and it’s not until we are able to sit back and reflect on all the good that we do that we often realise just how much of a difference we can and do make in our client’s lives. Take today, let me tell you about three clients, their stories and how it all unfolded, firstly let me introduce you John* and Sue*, they are both 70 and fairly typical retiree clients. They have combined investible assets of $850,000 and are receiving overseas pension income of $17,000. Their living expenses are around $60,000 including some low-cost holidays and they don’t qualify for any Centrelink at this point.


Their worry is how long will their money last, can they keep taking annual holidays, travel more than once a year, or do they need to cut back, especially with the current volatility that we are experiencing in the market. Now this is not an uncommon question and whenever we catch up with our clients to discuss their strategies, this question if it’s not asked, it’s certainly on their minds.


By anticipating their needs through experience, we had already projected out what continuing to receive a total retirement income of $60,000 would do for their retirement plans. In addition, we had prepared 2 other projections at $70,000 and $80,000 to highlight just how long on conservative projections their funds would last. Now the portfolio that John and Sue have within their fund is nothing sexy, more a very stable mix of quality blue chip Australian Shares, some international and local ETF’s, term deposits and some bank hybrids. Diversified enough that volatility is reduced and a portfolio that reflects their risk profile along with two to three years of cash plus dividends and income to fund pensions and ensure that in a downturn they wouldn’t have to sell any of their growth assets.


Our reward was to then experience the delight that they wouldn’t run out of money until they were hitting 100 years of age and that was on the projection for higher drawings. Turning a conversation around from how long will my money last, to what places we’d love to travel to and what would we love to tick off our bucket list just makes our day.


To keep reading this article click here


– Jenny Brown –


*The names of clients have been changed to protect their privacy.

Problem with Direct Life Insurance

In August of last year, ASIC completed a review of the direct life insurance industry and revealed some startling statistics in their report (Report 587).


Direct Life Insurance is defined as being sold to consumers by insurers or their sales partners, by outbound telemarketing, inbound phone calls from consumers, online or face to face (through bank branches). These products are sold with general advice or no advice given meaning that the consumer’s circumstances are not taken into account.


The report revealed that:

– 1 in 5 of all policies taken out were cancelled in the cooling off period

– 1 in 4 of all policies that remained in force beyond the cooling off period were cancelled within 12 months

– 3 in 5 of all policies sold were cancelled within three years

– 15% of claims from direct life insurance are declined and 27% of claims are withdrawn


The average declination of claims across the entire industry is 7%, less than half of that compared to direct cover.


ASIC believe that these high rates of cancellations and claim declines is due to consumers being sold products they don’t want, can’t afford, or don’t perform as expected.


ASIC also found that consumers struggled with the sales experience and complexity of the products, and consumer understanding of key features is often poor. ASIC identified a failure by the salespeople to provide adequate information about important aspects of the cover, including key exclusions and future premium increases. It is hypothesised that this lack of understanding about the product resulted in the high cancellation and claim declines.


A 2015 report, Underinsurance in Australia, with data compiled by Rice Warner revealed that that median level of:

– Life insurance meets 61 per cent of basic needs

– Total and permanent disability insurance meets just 12 per cent of basic needs; and

– Income protection cover meets just 16 per cent basic needs


So not only are people cancelling their covers early, even if they do hold the policies for a long time, the insured amount is often quite low compared to what they require.


At JBS we know that insurance can be complex with often slight differences between policies, but you do not have to try and organise it on your own. As well as selecting the best product for you, we can also help determine the appropriate amount of cover required ensuring that all of our clients are properly insured to protect themselves and their families. Finally, in the event of a claim, we will also be there guiding you through the process making everything as painless as possible.


If you are worried about your insurance levels but are too scared or time poor to go at it alone and would rather seek the help of a professional, please contact our offices at 03 8677 0688.


– Liam Rutty –

2018 JBS Wrap Up

As 2018 draws to a close, we look back and reflect on the year which has seen the JBS Team grow and change both individually and as a group. Warren joined Jen as a partner within JBS, Peter got married and the JBS team were there to help celebrate. Both Peter and Liam became Associate Advisers, Aakash is now a permanent resident and we have welcomed Varsha as a new full-time team member. Richard’s and his mates from school Nick and Locky have joined the team to help with administration and all things client services while they complete their university degrees and all celebrated their 21st birthdays. Liam purchased a new car and continues his reign of “Nugget Challenge Champion” in the office. Pj left the Victorian winter behind to conquer the summer in Europe and had an absolute blast. Jen and Bren are loving their lifestyle change and move down to Mt Martha.


From a business perspective, JBS has had an awesome year, we’ve continued with our educational series Join with Jen, Retire Right, and launched Partner Protect so if you haven’t yet seen any of our videos, jump on our website and take a look.


As we reflect on the positive year our team has shared together, there will be people going into this holiday season who are less fortunate than ourselves. Throughout the year, JBS has supported Make A Wish Australia, and in the spirit of giving we have again decided to donate to this charity instead of sending Christmas cards to our valued colleagues, clients and team. You too can make a donation to Make A Wish who grant the wishes of children suffering from life threatening medical conditions.


Holiday Opening Hours

JBS Financial Strategists will be closing on Thursday, 20th December and re-opening on Monday, 7th January 2019. During the holiday closure the business will be supported via email or Jen’s mobile phone for urgent issues.


We would like to thank you for your ongoing support and commitment throughout 2018.


From all the team at JBS, we would like to wish you, your family and your friends a wonderful holiday break, a safe & prosperous New Year, and we look forward to seeing you in 2019.


Below is a little snippet from our recent Team Christmas Event – it was a fantastic day, what a great team we have!

Insurance Premium Structures

Life insurers will generally offer you the choice to have either Level or Stepped premiums, or a combination on their policies. The type of insurance premium structure you choose will affect the initial cost as well as the total cover over the life of the policy. Generally speaking the duration of the cover may help to determine the appropriate premium structure you should use.


Stepped Premiums – Stepped premiums increase as you age, reflecting the higher likelihood of a potential claim. Stepped premiums have a lower upfront cost over the short-term (when compared to Level premiums), however as you age, the Stepped premiums start to increase, and the longer it is held, the more significant the increase becomes. Therefore, if you plan to hold the level of cover for a long period, generally greater than 10 years, it may be more beneficial to take-up a Level premium.


Level Premiums – Level premiums can provide you with peace of mind as they are designed to remain stable. The premiums will remain stable from the policy commencement until you reach a predetermined age (e.g. age 55 or 65), at this point the premiums will switch to a Stepped premium. Level premiums can still increase due to indexation or other increases to the sum insured. Level premiums can also change if the underlying assumptions and/or expenses of the insurer have changed since the policy started – however this will generally affect the stepped premiums as well.


At the beginning of the policy, Level premiums generally have the higher upfront costs when compared to Stepped premiums. This is due to the increased risk of claim as the insured person ages have already been factored in.


Hybrids Premiums – Some insurers may provide you with the option of a hybrid premium structure that allows you to use Stepped premiums for a portion of the cover, together with Level premiums for the remainder of the cover. This allows the premium structure to be aligned to short-term or long-term needs within a single policy.


From the beginning it’s important that you implement the correct cover and policy structure, as replacement policies can result in Level premiums being calculated based on your age at the time of amendment. If you take out new cover later on, you may also have to undergo medical tests and the like, which could result in the possibility of loadings or exclusions being applied to your policy, if you end up changing. This could result in your new cover becoming more costly or even unattainable and therefore effectively locking you into your current cover with the incorrect policy structure and/or cover.


JBS can assist you with all your personal insurance needs and can help determine the right level of cover for you and assess which premium structure is more suitable for your needs.

Structures Matter

We often ask ourselves what we should be investing in. Should we invest in shares? What shares should we buy? Is now a good time to be buying shares? Should I instead look at putting my money into a more defensive asset like a term deposit? Or even look at an investment property.


While all these questions are good, the first question we need to ask ourselves is who should own the investment, in other words what structure should we use?


When purchasing an investment we have a number of options available to us when it comes to ownership. Do we own the asset personally, jointly, within superannuation or another trust structure or even within a company of our own.


The majority of investments that we can choose can be owned by any of these entities. There are some exceptions however this article will not go into specifics. For the most part though, one of the main differences between the different ownership options is the tax treatment.


When you own an asset as an individual, the earnings are attributed to you personally and hence you will need to pay tax at your marginal rate. You will also be eligible for a 50% capital gains discount when you hold assets for longer than 12 months. As you will be paying tax at your marginal rates, owning assets as an individual can be beneficial for someone with a low income and hence low marginal rate but detrimental for someone who is already on a high income and high marginal tax rate.


The tax rules around jointly owned assets are very similar to that of an individual with one main difference. The earnings and hence tax is split between each of the owners. A husband and wife for example can split the earnings 50/50 between the two of them. This comes in handy when both partners are on high incomes for example although other options may be preferable.


A common misconception is that superannuation is an asset in itself. This is not the case, it is simply a structure that owns the investments. The main benefit of superannuation funds is that the tax on the income is charged at 15% and capital gains (if the asset is held for longer than 12 months) are taxed at 10%. Current legislation also states that when the superannuation fund is turned into a pension account the tax on the earnings within that pension account attracts 0% tax. This is clearly the best way to hold assets from a tax perspective however the obvious downside is that you aren’t allowed to access the money/investment until you meet a condition of release. The government has also put a cap on the amount of money that you are able to contribute into superannuation each year and also the amount of money that you can transfer into a pension account. These restrictions have been discussed in detail in previous articles so I will not go into them here.


There are lots of different types of trusts (superannuation being one of them) however here we will cover unit trusts and discretionary trusts in particular.


In the majority of circumstances the trusts themselves do not pay any tax and instead the tax is paid by the beneficiaries as all income is distributed through to the beneficiaries. For a unit trust, the distributions are paid according to the amount of units owned. For example, if a unit trust has 10 units, and person A owns 7 of those units, then person A will receive 70% of the distribution and hence will be required to pay tax on the amount. As the income flows through to an individual in this example, they will receive a 50% capital gains discount for the unit trust holding the asset longer than 12 months. A unit trust may be applicable for someone running a business with other people who are not part of their family with distributions to be allocated according to the % ownership.


A discretionary trust while similar to a unit trust has one distinct advantage. The earnings can be distributed to any beneficiary on a discretionary basis. That is, you can choose how much of the distribution gets paid to each individual beneficiary and this can vary from year to year. You can therefore allocate more income to those on lower tax rates and less or even no income to those on higher tax rates. This is often used for family owned businesses where money is often allocated to children, non-working spouses or even retired parents in order to keep the tax low and is where the name “Family Trust” originated from. This is the most flexible of structures to hold investments in although you need to remember that all earnings need to be distributed to the unit holders and there are costs associated with the setting up and running of the trust.


Companies are similar to Unit Trusts in that the amount of income that is distributed to shareholders is determined by the share of the company that they own. If you own 70% of the company you get 70% of the distributions. However there are some big differences.


The first one is that the company pays tax (ranging from 27.5% – 30% depending on the size of the company). This means that as dividends are distributed to the company owners they receive what is known as franking credits to offset the tax already paid by the company.


The second difference is that unlike a trust, earnings can be kept inside the company structure rather than being paid out to the company owners. This can help build the assets inside the company where the tax rate is only 27.5% compared to the individual where that tax rate may be up to 45%.


The main disadvantage when it comes to companies is that they are regulated by ASIC. Unlike other ownership options, there is some compliance that needs to be adhered to when running a company and hence more fees may be payable and more work is required.


Structuring the investments in the right way to ensure the minimum tax payable is extremely important but tax is only one factor that needs to be taken into account. If you want to know more, not just about investments but about setting up the correct structure for your goals and needs please contact our offices today.



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