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Superannuation reforms have generated a lot of inquiries in our Perth office. We want to take this time to thank you all for your inquiries and to provide a short guide to the more important parts of the reform and how they will affect you. Remember that our information is general in scope and that we can’t provide blanket advice because every investor’s situation is different.

Any new Superannuation Fund started as of 1 January 2015 will be subject to the new deeming rules. The rules have changed the Age Pension income test, effectively double-counting any superannuation assets when assessing income. Since many Australians will still be depending on their Age Pensions as a significant part of their retirement income, the changes could potentially be devastating to many retirees.

The mechanics of the assessment are complicated and explaining them here is not the purpose of this piece. The net effect is that a lot of Australians could collect less money during retirement due to the changes.

Who Will Be Affected?

It is important to know whether or not your superannuation fund will affect your Age Pension income test in the future. If you are already receiving the Age Pension now or begin receiving it before 1 January 2015, you will be exempt from the changes and your Age Pension income test will continue under the old rules.

The ins and outs of SMSF borrowing to fund your property investments.

Under the right circumstances, you can now use your SMSF to invest in most forms of real property, including industrial, commercial, residential and farm property. Before September 2007, it was much more difficult; that month marked the first easing of SMSF regulations in regard to real assets.

In July 2010, the rules were relaxed yet again. Now, with the exception of two specific situations designed for short term cash flow, you are allowed to formulate a limited recourse borrowing arrangement, or LRBA, which limits the lender’s recourse to the specific asset for which the money was borrowed.

The LRBA is now extremely popular as an SMSF investment strategy, so popular that on 14 September 2011, the ATO felt it was necessary to draft a clarification of the rules for LRBAs. In May 2012, this would be finalised as “SMSFR, 2012/1,” which discusses the key concepts that are consistent with the application of the limited recourse borrowing arrangement provisions.

What is trauma insurance and how does a recent change in regulations affect your Self Managed Super Fund (SMSF)?

Trauma insurance is a form of cover that pays a lump sum if the insured receives a diagnosis of any of the critical injuries or illnesses specifically mentioned in the policy. Conditions most commonly covered are coronary bypass, heart attack, stroke or cancer. The lump sum is paid out whether or not the insured is unable to work; the diagnosis is the only factor.

Ever since the Superannuation Industry Supervision Act (SISA) in 1993, trustees of SMSFs have been allowed to purchase trauma cover for any member of the fund as long as a long list of requirements were met. However, this situation changed on 1 July 2014. Members who join an SMSF after 1 July 2014 are no longer eligible to have the SMSF purchase trauma insurance for them.

The SMSF can only insure a member for the following conditions

According to a recent study published at news.com.au,* the average Australian may be hard pressed to find extra income for superannuation contributions. The data would appear to say that Australians are spending most of their take home pay on necessities and don’t have a lot left over at the end of the month. But is that really the case?

Let’s take a look at what the study says first, then we’ll tell you what we see from a financial planner’s point of view.

By the Numbers

According to the study, 20.5% of the average Australian’s take home pay is spent on housing. This works out to $990 per month for every household in WA spending the most at $1249 per household and SA spending the least at $787. It must be remembered that these statistics include those living in regional areas.

Household bills are the next highest expense, weighing in at 15.5% or $633 per month. For the record, this number, which included power, telephone and Internet bills, surprised a lot of economists. Groceries averaged $531 or 12.1% of monthly income. Transport was $299, which worked out to 6.9%. Australians spent $174 or 4.2% on health expenses.

We offer advice for self managed superannuation funds (SMSFs) to a large number of clients in the Perth area. When gathering information and doing preliminary work with our superannuation clients, one of the first things we recommend is to find out whether or not they have any unclaimed super accounts.

Currently, there are over 6 million unclaimed super accounts in Australia, which are worth more than $18 billion, according to the Australian Taxation Office (ATO). Doing the math, that means the average unclaimed super account is worth around $3,000.

How to Lose a Super

Usually, a super fund or account gets lost because the fund provider can no longer locate or reach the account holder. An account holder can be an inactive member, they may have died or they may have changed addresses without notifying the fund provider. Some accounts are lost when the account holder moves out of country. Often, an account holder changes jobs and forgets about their super.

How to Find Your Unclaimed Super

The easiest way to find lost super is to contact the fund provider. This will require that you have information on file such as a past statement. If you don’t have a statement or aren’t sure, you can use an online service provided by the Australian Taxation Office called “Super Seeker.”

Why so many Australians are choosing to obtain a life insurance quote as part of their wealth protection protocol.

When deciding upon wealth protection products, many business professionals are focused on obtaining cover for their assets. Often, they have to be reminded that they have neglected one important asset: themselves.

As a business professional, you have worked hard to “climb the ladder.” No matter what path you have taken, your unique skill set, motivation and talent have enabled you to create a certain level of income. That income has provided for you and/or your family, allowing you to live the lifestyle you desire.

But have you thought of what would happen if you were no longer able to work? Have you thought of what would happen if you were to suffer a tragic accident or illness, leaving your family alone and without income?

We have. It’s what insurance companies do. Here is a quick overview of three basic life insurance products.

Why it is still important to have permanent disability insurance in Australia.

With the rollout of DisabilityCare Australia, many Australians are of the mistaken impression that it will no longer be necessary to purchase permanent disability insurance. This is not true, as the current setup will not affect Australians who suddenly find themselves with a total and permanent disability due to accident or illness.

So, how do you decide exactly how much total and permanent disability insurance (TPD) you need?

The first thing to do is to get a firm grasp on your personal financial situation. For example, how much money do you owe on credit cards. You probably also have an automobile loan and a home loan: how much would it cost to pay them off? How much would it cost for utility bills? How much would it cost you to eat?

If you suffer a permanent disability, you may also have to retool your home and automobile to help compensate for your disability. You may also need carers to help you in your diminished physical capacity. How about your general living expenses? You may also want to make investments in the future. How much money will you need on a monthly basis to cover all of this?

Consulting a financial planner is a great first step; here are some things to help you prepare for your first meeting.

The best approach to financial planning is to work with a professional financial planner. We can’t give specific advice on a blog because everyone’s situation is different, but we can give you some general guidelines that will give you an idea of what to expect when you have your first consultation with a professional financial planner.

Your Debt Level

Generally, we are all for reducing debt, starting with high-interest debt such as credit cards. When you pay interest, that money is working for someone else. You will want as much of your money as possible to work for you.

Room for Rent?

An “empty nest” often has a room or rooms that can be used to provide rental income. If you don’t mind having someone else around the house, you may consider renting one or more of your rooms.

Have you ever wondered how term life insurance works? Here is an easy explanation to get you started.

You may know term life insurance by one of its other names: life cover, death cover or life insurance. By any name, term life insurance is an inexpensive way to protect your family in the case of your death or diagnosis of a terminal illness.

You pay premiums for the policy. If you die or are diagnosed with an illness that is likely to be terminal within twelve months, your family receives a lump sum payment. Policies are different from provider to provider, but here are some of the more important variances.

Benefits

The benefits available in life insurance policies can differ from provider to provider. You may choose your level of coverage based on how much you want to spend on premiums. Most companies have a minimum amount that you can apply for and a maximum amount. The maximums are based on age, decreasing as one becomes older. Premiums tend to increase with the beginning age of the insured.

Inclusions

Many policies have various inclusions. For example, many offer to advance part of the payout for funeral expenses. Some have inflation clauses or increase by a predetermined amount every year to compensate for inflation. While some policies don’t guarantee renewability, some do guarantee that a policy can be renewed as long as premiums are paid.

Why many investors choose industry super funds over SMSF—and why many don’t.

There are as many situations as there are individual investors. SMSFs, or “Self Managed Super Funds,” have become a popular choice among individual investors and small groups of investors, while industry super funds have also become a popular choice for individuals. While there are plenty of other choices such as retail funds, this article will explain the difference between SMSFs and Industry Super Funds

So, which one is better? It depends upon your situation. While we always recommend seeing a superannuation professional for advice, we would like to offer some general guidelines to give you a better idea of what to expect when you have your first consult with a financial planner about superannuation.

Control

Changes in superannuation regulations have allowed a lot of Australians to take the opportunity and exert control over their super funds. An SMSF allows for a lot more individual control than an industry super fund does. While the industry super fund is basically a passive investment that requires no effort on your part, an SMSF will require you to be a trustee of your own fund. That makes compliance and risk your responsibility.