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.

Whenever you start anything new there is always a little bit of anxiety that comes with it.  For me, my new beginning was joining the JBS team in early July.  I’ve been in this industry for over 12 years. I know how to do my job, what could I possibly be worried about?

I was fortunate enough to be able to choose when I left my previous position before coming to JBS which meant that I had 4 ½ weeks for some doubts to build in my mind.  Had I done the right thing? Would I be able to handle the work? Would I fit in with the team? How are their processes different to my own?  As a father of 2 and a wife on maternity leave, it was imperative that I had made the right decision not just for myself but also for them as they were and will continue to rely on me.

A few days before I was due to commence work at JBS, we celebrated my daughter’s 3rd birthday. A big Frozen fan, after her Frozen themed party on the Saturday, we took her to Disney on Ice on the Tuesday. It was her first time and to see the joy on her face as she watched her favourite life-sized Disney Princesses and other characters skate around in front of her put things in perspective. The skaters were professionals, like myself they had been doing the same thing for years honing their skills. Their ‘work’ became 2nd nature, they could do the routine with their eyes shut. What was I even worried about?

The first thing that happens when you join a new company is they introduce you to everybody else in the firm. So I’m greeted by a bunch of smiling faces who all tell me their name and within 30 seconds I’ve forgotten most of them. That’s alright, I’ve done this before, I’ll simply draw up a seating map of the office and whenever I hear anyone’s name I’ll simply write their name on the map at the place they sit. Problem solved.

The next thing that happens is they teach you the software. I’d used plenty of financial planning software programs before (including the JBS one years ago) so everything made sense and was easy to follow. Coincidently, after 2 days it just so happened to be our end of financial year drinks. So my first week in the job consisted of meeting new people, running through the software and eating a parma and chips while drinking beer and chatting about everything and anything. I was lucky in that this social environment allowed me to talk to everyone at the firm and get to know all about them, learn what their interests were, understand how they think, and after a few drinks find out what they really think of JBS. One thing that stood out to me was the fact that the staff have all been here for a long time. The firm had a low turnover of staff, a great thing to hear. The staff are all happy and it’s a great place to work.

Week 2 and the real work began. Working with the other guys in my team, Glenn & Andy, has been great. Glenn has the skill of being able to trust those around him. If he asks you to do something, he trusts you’ll be able to do it and do it well. This gives you a sense of worth, makes you feel valued and gives you a sense of responsibility. I am being trusted to complete this task. Not everyone is like this. There is nothing worse than being asked a question, providing an answer, and then the person ignores your answer and asks someone else. If you weren’t going to listen to me, why did you bother asking me in the first place?

Andy is great in that he is always ready to drop what he is doing and help you out. If I’m struggling with some abnormality in the software, or I need some client data that I can’t find, he’s always happy to help, smiling the whole time. He’s also the first to throw you under the bus if the Friday lunch order isn’t correct even though he didn’t order anything himself.

It’s now been two months, and I’ve been able to settle in nicely with the team at JBS. They are a great bunch of people always willing to help with anything. I have even been able to pick up some good Pokémon Go tips that I can use with my daughter, and with plenty of banter flying round the office, I feel very comfortable as part of the JBS team. New beginnings can be daunting, it’s the fear of the unknown that worries us all. However worry about what you can control, prepare yourself as best you can, and with the right attitude there is no need to be afraid of the dark.

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.

Attention small business owners – What happens to your business debts if something was to happen to you??

Most businesses, in order to start or expand will have organised one or more loans. More often than not, because these loans are of substantial amounts, they require a personal guarantee.

A personal guarantee means that the loan is secured against personal assets, most commonly your home. These ‘guarantees’ are not extinguished until the loan is repaid in full or revoked by the bank or creditor. In the sudden event of death, the guarantees and loans do not die too! Repayment or renegotiation is a critical financial issue that is inherited by other guarantors or your family.

Appropriate Key Person Insurance, Business Succession Planning & Guarantor Protection Business Insurance can help remove this

Margaret’s Story:-
As Margaret and her two young children said their farewells to their husband and father on the day of his funeral, they did not realise that their pain and suffering was about to get worse.

Nathan was tragically killed in a car accident driving home one day after work. He had worked hard to build his business to the point where it provided a financially stable environment for his family.

As with many businesses, Nathan took out significant loan and gave personal guarantees without realising the full ramifications of what those guarantees meant.

Nathan’s business debts did not disappear with his death, as many people think will be the case. His estate became liable for his loan. As a consequence, Margaret was left with insufficient funds to discharge the liability and was forced to sell personal assets and the family home to meet his liability.

Had Nathan taken out personal guarantor protection insurance he could have provided the financial security for his family that he intended.

If you are a small business owner and would like to discuss in more detail, please contact the team at JBS.

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!

“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.

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.

Voters in England have spoken and voted in favour of Brexit, which means Britain is exiting from the European Union. In the coming months, British and European leaders will begin negotiating the terms of Britain’s departure which can take up to two years to finalise.

Britain’s exit will affect their economy, trade, immigration policy, and lots more and will take years for the full consequences to become clear.

Prime Minister’s Resignation
Through pressure from within his own party, British Prime Minister David Cameron promised to hold a referendum on leaving the EU as a result of the conservative party winning the 2015 election. Cameron didn’t want to hold the vote at all however true to his word, it was held and he campaigned the “Remain” vote however let members of his own party to campaign for “Brexit”.

When the Brexit vote won, Cameron resigned as his views were in contrast to the British people. It is unsure what will occur now with the Prime Ministership; who will take the role or if the Conservative party will even remain as is or splinter due to the separation in its own party on the Brexit issue.

Immigration
Being part of the EU means that anyone living in an EU country can travel and live freely in any other EU country, and this will now change. While they could negotiate the same or similar terms, it seems that this was a contentious issue that possibly contributed to the Brexit vote winning. At present, it is estimated that around 1.2 million Brits live in other EU countries while there are around 3 million non-Brits that have legally moved to Britain as part of the EU rules.

The Economy
Brexit means uncertainty with Britain’s largest trade partner; the European Union. Shockwaves were felt in global markets, with around $2 trillion wiped off the world markets. The London stock markets finished down 3.1% and in Australian markets, the ASX200 finished 3.2% down.  The pound also saw a significant drop.

Some say the decision caught markets by surprise as it was expected that Britain would remain part of the EU. In any event, the decision has been made and the initial reactions have been felt, which was representative in the markets on Friday. We will now see more informed decisions with market movements.

Since more than half of UK trade is with the EU, they will be taking the next two years to negotiate heavily to seek favourable trade options, like their neighbours in Norway and Switzerland (not part of the EU) have successfully done themselves. This means we won’t see the full ramifications to markets for years to come.

While volatility is expected to continue for at least the week, it is the impact on investor sentiment that will determine longer market volatility. At present, Australia has relatively low trade with the UK and the European Union so we will be hit more by the fallout of the world digesting the ramifications of Brexit.

Investing in a diversified portfolio across investment types, portfolio sectors and even markets assists to limit short term volatility like we’ve seen from the fallout of Brexit.

If you’re concerned about your portfolio or other investments, please do not hesitate contact your adviser at JBS for a chat. Please also see our Monday Markets newsletter for additional detail on the affect on our Markets including a video summary.

Not sure about everyone else, but I haven’t been camping in over 10 years and I’ve found a few things which changed my camping experience.  I’m going to sound like an elderly person here and say “back in my day” when I went camping it was a simple tent, clothing, torch and a lot of long life and dried food, such as noodles and tuna.  So when a mate asked me to go camping during my long month break over Christmas, I’ve instantly jumped at the idea as it’s been ages since I’ve tackled nature head on.

The first hurdle was passing the idea with my other half as she often gets concerned having to stay at home by herself and our little one.  So I quickly reminded her that we actually have a car, which could transport her to any one of our relatives that lives around the area (including mum and dad), should she ever feel concerned.  With that out of the way, I went shopping for all the necessities, which was simply plenty of dried noodles and tuna.  I also went shopping for a new fishing rod as the last one I had is in someone’s car boot.  All the other equipment such as torches and lamps, I was hoping my mates would provide.

Driving up to my friend’s house, I was excited to show everyone how much food I’ve brought only to be laughed at.  It was confusing at first; however I quickly discovered that portable fridges and freezers can now be installed into 4 wheel drives, which were powered through solar panels.  This meant we could have bacon, eggs, meat and more meat.  Most importantly this meant we could bring milk for coffees in the morning.  So feeling a bit embarrassed, I left a lot of my dried and boring food in my car and went with what the boys had brought.

Approaching the camp site, I imagined the area will be secluded and at most there would only be a couple of fellow campers.  To my amazement the entire campsite was filled and it almost felt like I was back in Melbourne CBD.  After 10 minutes of looking we finally found our own area and commenced setting up tents.  Another 5 minutes later I started to realize how many new and cool camping accessories were available now.  There were caravans that folded out to build an entire outdoor kitchen and play area, a tent that was so large it provided separate rooms, including a toilet and kitchen for its tenants.  Then there was the massive Winnebago which has the lot and comes with television, microwave and oven!  I however was content with our fragile tents and camping chairs.

I actually had a blast spending time outdoors without all the comforts of modern society.  The bugs, mozzies and mud (when we went fishing) didn’t sway me one bit but the one thing I found very difficult was not been able to check my phone.  There was no reception where we camped and not been able to make a call or check my messages for 3 days straight was a lot more difficult than I imagined.

I believe everyone has their own description of camping, whether it be a simple tent under the stars and nothing else, or bringing all the modern comforts along with you such as television and fridge.  The most important thing is we get fresh air, see bright stars at night and get the chance to spend time with our family and friends.

Overall I’ve learnt some important lessons about modern camping which can be applied to many activities we do in life.  Namely preparing the required necessitates for camp 10 years ago is not the same as it is today.  The next time I go camping again, I’ll be sure to research into what new tools and accessories are available for camping trips or even just man up and ask my mates what I should bring as I’ve got no idea.

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.

I’m guessing you’ve heard the term ‘golfers widow’ which really is the term that wives are given if they lose their husband to golf of a weekend…well I’m a Schwarzenegger widow. Sounds funny I know but this was never more apparent than a couple of weekends ago when the Arnold Classic and all it’s Arnoldness came rolling into town and I lost my husband.

I knew when I met my husband 20 years ago that he was an Arnold Schwarzenegger fan but over the years, being a fan turned into an obsession which transformed into one of the biggest collections in Australia. We’ve met the main man himself a couple of times, had a few photos, some passing hello’s through a crowd and even a chance encounter at the Classic last year where there was real one-on-one conversation.

So what does that mean for me and my family? How has it affected our lives? Well, my son’s middle name is Arnold, there’s a room in our house dedicated to Arnold (thankfully we have doors) and I lose my husband whenever anything remotely Arnold happens in Australia.

While he loves the man, he’s never caught any whiff of motivation to start working out (which is great cause I’m not a fan of the muscly bod), he does love all his movies, his political involvement, his kids and anything else. We’ve been to the house he grew up in, we’ve been to his office in Sacramento when he was in politics, we’ve been to Sydney for his movie releases, anywhere possible for an Arnold sighting.

And while I don’t understand it, I do encourage it. We all have our interests or vices so why not Arnold? A great achiever in life (except for a little adultery and child out of wedlock). I love my hubbies dedication and joy when he find a new piece for his collection or he talks about how he came across one of his favourite items. Want to see how full on his collection is? Well, please check out his website (yes I said website)

But really, I hope everyone has their ‘Arnold’ – maybe not as full on as my husband is but something they are passionate about, something that just fills you with joy for no real reason; something outside work, family and friends. An interest, a hobby, a passion! Mine is my Fiat 500 which I’ve previously written about and you’ll be happy to know I’m about the get the front suspension onto my beauty very soon (she writes with a massive smile). Life is for enjoying so get on and enjoy whatever it is that makes you happy!