Staff Updates
From 1st August 2016, Jessica Jalkanen is taking maternity leave. Any email queries that you usually direct to Jess can be sent to Allison Burman (allison@veritassolutions.com.au), or alternatively you can call the office on 02 6162 1522.
Ken Wild has been enjoying his extended leave but we are sure that he is looking forward to returning to work at the beginning of August. For queries in the meantime, please continue to contact Allison Reid, Rose Geary or Jodie Dickson.
A Will is not enough – where will your Super go?
Superannuation is managed by Trustees and regulated by trust deeds and superannuation law. When you die, your superannuation balance does NOT form part of your estate nor is it automatically covered by your instructions specified in your Will. The Trustees of your superannuation fund, whether it be a self-managed fund, retail or industry fund, have the power to exercise their discretion in dealing with a deceased members benefits.
We recommend all members put in place a Binding Death Benefit Nomination (BDBN) with your fund(s), preferably non-lapsing (if available). If a BDBN is in place, a trustee no longer has discretion about how to pay your death benefits as they are bound to what is specified in the nomination in the proportion you have stated. Unfortunately, when no nomination is in place, or the nomination is non-binding, the Trustee has complete discretion on how the benefits will be allocated.
All clients with industry and retail funds should check their latest member statement to make sure a binding death benefit nomination is in place. If not, this form should be readily available from the funds website to complete.
Our Self-Managed super fund clients should have in place Non Lapsing Binding Death Benefit Nominations. If personal circumstances have changed recently, please contact the office so we can prepare a new form for signing. If you do not have a copy of your nomination, we can email/mail a copy to you as you should have these with your personal records. Please let us know.
Estate planning is a complex area so we recommend you seek specialist advice to assist with understanding taxation consequences and to make sure your intentions will be followed through. Please contact our office if you need any further information or assistance.
Insurance in a SMSF
If you are thinking of getting insurance in a SMSF, there are a few things you should consider first:
- The benefit of insurance is that it provides protection for the members of the super fund that are listed on the policy. It may also be more tax effective for the super fund to be claiming the expense than yourself personally. There are also cash flow benefits of using the money within the super fund to pay for the insurance, rather than from your personal income.
- The disadvantages of insurance is that the premiums you pay from the super fund may be higher than you would pay personally, and there may be tax payable on some of the benefits paid. Also, using the super fund’s cash to pay for the insurance will reduce the member’s retirement balance. In some cases the member may have the option to contribute money into the super fund to pay for the insurance, however this contribution will count towards their contribution caps.
- The types of insurance products that SMSF can purchase include life insurance, standard income protection and Total and Permanent Disability (TPD) insurance with own occupation definition.
- Making an insurance claim through your SMSF can be a complicated process, with a requirement to meet a “condition of release” according to the SIS Act in order to access the insurance payout. In some circumstances it may be more appropriate to hold some types of cover outside of the fund, thereby removing the requirement to meet the difficult “condition of release” from super.
If you would like more information for whether getting insurance in your SMSF is right for you, please feel free to make an appointment with our financial advisor.
ATO target areas
Each year the ATO targets specific items which they consider to be at high risk of being claimed as incorrect deductions. Individuals’ tax deductions are being scrutinised this year, with the ATO reminding people that they are entitled to claim a deduction if the 3 golden rules apply:
- Make sure you spent the money yourself and were not reimbursed
- Make sure it’s related to your job
- Keep a record to prove it
The ATO are focusing on deductions for phone and internet, car and travel expenses and self-education, however if they are work related expenses then you are entitled to claim what you are owed, but no less and no more.
The ATO are also focusing on the so-called sharing economy. Uber drivers, people who let out rooms on Airbnb or storage on Spacer and many other apps connecting people who need with others who have are being warned to declare every cent of income earned in this way. If you are going about something in a business-like way, then everything from the first dollar is considered taxable income. Uber drivers are also required to pay GST on every dollar, but this has not filtered through to other services as yet. If you are unsure of what your obligations are or you need help with your bookkeeping, record keeping or tax return preparation, please contact our office and have a chat with one of our accountants.
These targeting measures are designed to catch out those people making false and fraudulent statements so if you do make an honest mistake then you have nothing to fear. Simply alert your accountant or the ATO to get it sorted out. If you are unsure what you are entitled to claim, check the ATO Website or contact our office for more information.
A few interesting facts about retirement
Given the financial demands of everyday life, planning your retirement may be a relatively low priority. You may also think that you have plenty of time to plan. But before you put off planning for your retirement any longer, here are some key facts you should consider.
Your retirement could last 30 years or more
A male currently aged 65 has a future life expectancy of 19 years and for females currently aged 65 it’s 22 years. But these are just the averages and they are increasing steadily. As these trends continue, your retirement could stretch to three decades, or maybe even longer.
You shouldn’t rely on the age pension
The full single rate age pension only provides around 25% of average weekly male earnings. What’s more, qualifying for the age pension may become more difficult in the future, given our population is ageing.
You shouldn’t rely on an inheritance
Your parents may end up spending all their savings and may even need to downsize their home to help make ends meet. So, if you’re relying on an inheritance to fund your retirement, you could be disappointed.
You might not have enough super either
With some of your money going into super through compulsory employer contributions, you’re off to a good start. But assume that those employer compulsory contributions will mean you have enough super to get you through your retirement and you could be in for a nasty surprise. Research conducted by Rice Warner Actuaries revealed that Australia has a shortfall in super of close to $1 trillion, which means many Australians may not have enough super to fund their retirement.
So what can I do?
Start planning now
Thankfully, with a bit of preparation, it’s possible to plan for a long and comfortable retirement. Strategies like salary sacrificing into super, making lump sum contributions or using a transition to retirement strategy (pending the election result), are all smart strategies to consider to boost your super, and some of them generally have tax benefits too. It’s also possible to use your super to start a pension that pays you a regular income. Some pensions even guarantee to pay you an income for the rest of your life, negating the risk of outliving your savings.
Talk to a retirement planning expert
The best way to see how your retirement savings are currently tracking, and find out what you could do now to increase your super for retirement, is to call our office and speak to our financial adviser, Ken Wild. He can help you set realistic goals and put a plan in place to achieve them.