“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.

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.

In November I became a parent to a ‘furbaby’ named Raffa (yes after the tennis star).

Deciding to get a puppy was a very hard decision, one that had been pending in our minds for about 18 months. Being professionals we weren’t 100% sure if working 9-5 would be unfair to the little guy and our concern was would we be giving him the best life.

Before we made our decision we did a lot of research on breeds and searched nearly every day on pet rescue in case we found a dog suitable for our situation and home. We wanted a smallish breed that we could have inside with us without ruining furniture but have enough energy to keep up with our active lifestyle. We had narrowed the breeds down to a Beaglier (Beagle cross King Charles Cavalier) and Cavoodle (Poodle and a Cavalier King Charles Spaniel).

From what we researched both breeds have exceptional temperaments, are very loving and gentle creatures and when given the proper training and exercise do well in apartments and small houses.

So we eventually decided on a Beaglier as a friend of ours has a 3 year old beaglier who is fantastic and we fell in love with a photo that was sent to us from the breeder. After visiting we couldn’t resist taking him home. Our only concerned was the beagle ‘hunting’ drive however the cavalier cross in him calms this instinctive nature.

Having beagle cross makes him very easy to train as everything revolves around food, so after a few treats he picks up basically anything you are teaching him. Raf has the most gentle and loving nature and compared to other puppies in his obedience class, he is an absolute angel. He hasn’t (yet) chewed any shoes, furniture or even any of his own toys. So when I hear stories at school that other puppies have chewed skirting boards, couches and even their own beds I think we have the perfect breed for our lifestyle.

When we are home he is our little shadow never wanting to be too far away and when at the park he doesn’t venture too far without looking over his shoulder to see if we are still following him. The only negative I have about the breed is the short hair, which sheds all  but other than that I couldn’t recommend the breed more.

If you are thinking about getting a furry addition to your family, it is vital to do some research on the breed and also consider similar breeds to ensure you get the right temperament for your family and lifestyle. Choosing the wrong breed can lead to a very unhappy experience for both parties. Adding a pet to your family is long term commitment and just like any major decision in life – taking the time to research and plan instead of rushing a decision can make a world of difference.

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.

Every business with two or more owners should consider what might happen to the business if one of the owners dies, becomes totally and permanently disabled, or suffers a terminal or traumatic illness.

A business generally depends on a few people to produce the profits, provide the capital, and manage the business.  If there is no viable succession plan, there may be significant financial hardship for the surviving business owner(s), as well as for the surviving family members.

Business Succession Planning is an area often neglected by successful business owners, and this lack of understanding can have dire consequences for the business and its partners.

An example of this is a business where there are two equal partners. The value of their respective shareholding is $500,000. If one partner were to die, then the business would need to find $500,000 to pay to the departing partner’s estate. There are a number of options here but most are not viable:

Borrow – May not qualify for a new loan, can the business pay the loan.

Liquidate – Not fair for the surviving business partner, selling price may be well below market value.

Sell Business Assets – These resources may be needed for the business, potential reduction in business cash flow.

Sell Personal Assets – Loss of lifestyle.

Bring in a New Partner – Who would this be?  Cost to find, time to find.  Potential control issues.

Insurance – Low cost, provides certainty.

A business succession agreement involves the business partners entering into a legally binding written agreement to plan what they are to do with their respective interests in the business should any of them die, become disabled, resign or retire.  In this respect, the agreement covers the voluntary and involuntary exit of a partner from the business.

It is vital for any business to have a succession plan in place, but perhaps particularly so for small businesses. Unless you can afford to rebuild your business from the ground up, you need to protect your business from almost any eventuality.  While you may think it may not happen to you and your business, you have to imagine how your business would fare in the event of the loss of a partner or key person – would your business survive if you didn’t have a Business Succession Agreement?

We stress that all businesses have a succession agreement in place so the business can continue to operate with minimal distraction in the event of a loss to a key person, and a funding strategy is in place for the departing business partner ensuring a smooth transition during a difficult period.

JBS can assist in this area, please give us a call to discuss further.

This morning I went for a 10km run, which I love doing a few times a week to de-stress and stay in shape. If you had met me 6 months ago you would have known that I hated running and hadn’t run a kilometre in my life. Any time I tried to run I felt horribly ill, out of breath and had to stop within 5 minutes.

I was at a point where I felt that I needed to get fitter for my overall wellbeing, but I knew I would continue sitting on the couch if I didn’t set myself a firm goal. So I decided to aim high – I was going to enter into a 10km fun run. With only 6 weeks before the event, I purchased my $90 ticket (the price itself was enough to motivate me), strapped on my new running shoes and ran my first kilometre.

At first I thought I was crazy – I would get half way though a run and have to walk the rest because I was so out of breath!  I started to realise this was a mental challenge as much as it was physical. Even when the going got tough I didn’t let myself give up, I knew persistence would be the key to success. Similarly to investing, running 10kms wasn’t going to happen over night, it took patience and commitment (and a whole lot of blisters!), but I knew the payoff would be worth it in the end.

Bit by bit, running got easier and I found I could go further every week. Eventually, I started really enjoying my runs and they became my favourite part of the day! As the race approached, I knew that running 10kms would still be a challenge but I felt that I had trained hard in the weeks leading up and was ready to take on anything.

After so many weeks of preparation, training and perseverance, the day finally came. I was so exited and nervous at the starting line and felt so proud that I had even made it that far.

The feeling that I got when I crossed the finish line was truly worth all of the pain. With adrenaline pumping through my veins and my family cheering me as I crossed the finishing banner, I felt like I was on top of the world.

Reflecting on my achievement, being determined and putting in the hard yards was how I reached this enormous goal. Like anything in life – practise makes perfect! If you want to achieve something, you need to put the time and effort in to see results.

Now I’ve set my sights on a new goal – this time I’m going to run 15kms! I can’t wait to see how far I can run and what more I can achieve when I set my mind to it.

I started gardening four years ago as a way of relaxing. What started as one small garden bed in the backyard quickly turned into me redesigning the entire front yard! My favourite time of year has to be end of winter through to spring. That is when all the bulbs that are hidden in the various garden beds come to life again and dazzle us with their colour.

In order to prepare for our spring garden we need to start planning now in January. I have learned that with gardening, I am always focussed at least 6 months ahead. Spring bulbs need to be planted in February/March, the exception being Tulips. Tulips need to be placed in the fridge for five weeks and then can be planted in May. It sounds odd, putting bulbs into the fridge before planting, but they need to be chilled in order to flower.

This year we will be shuffling bulbs around, what I refer to as my ‘Bluebell garden’ will be dug up and halved to make room for more Tulips. The Ranunculus and Anemone gardens will be added to as well. The hardest part is limiting myself each year with how many bulbs to purchase! It is very easy to get carried away with ideas about what I want to add, I have to remember that it is very important to look after what is already there, the bulbs need fertilising and fresh compost every year. The same principle can be applied to retirement savings, it is important to look after what is there; because once it is gone it is costly to start again.

It is always sad when the spring flowers start to fade and the garden looks lifeless once again. But, then I remember that summertime means David Austin Roses will bloom, colour will be restored and the next project begins: planting sunflower seeds!

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.