Staff Updates
Veritas Wealth Solutions would like to extend our congratulations to team member, Tracey Whittaker, who married her long-term fiancé in a surprise ceremony during a recent trip to the USA. Going forward, she will now be known as Tracey O’Brien. Please note that her email address has not changed.
Simpler BAS Reporting
From 1 July 2017 the ATO is simplifying GST reporting for small businesses with a GST turnover of less than $10 million.
Simpler BAS Reporting aims to make BAS preparation easier and quicker as small businesses will only need to report:
- G1 – Total sales
- 1A – GST on sales
- 1B – GST on purchases
Simpler BAS will not change how other taxes are reported (PAYG tax withheld or PAYG income tax instalments), reporting frequency or record keeping requirements.
Demystifying shares for new investors (and a refresher for seasoned ones)
We regularly have clients investing in shares directly or via a self-managed superannuation fund for the first time so we have outlined below what to expect when you purchase you shares.
CHESS Registration & Holder Identification numbers (HIN)
If you purchase shares via a broker whether it be an online or full service traditional broker, generally you will be CHESS registered. CHESS (Clearing House Electronic Subregister System) automatically manages the transfer of funds and legal ownership between buyers and sellers.
If you hold a CHESS account you will receive a Holder Identification Number (HIN) which will start with an “X”.
Any personal contact changes, for example address changes, will need to be updated via your broker and you will receive letters from CHESS confirming any changes made to your CHESS account. These details cannot be changed via the share registry when you are CHESS broker sponsored.
Issuer Sponsored & Security Reference Numbers (SRN)
Shares that have been purchased without using a CHESS account (known as broker sponsored) are known as an “Issuer sponsored” trade, often occurring via an “initial public offering” (IPO) or some other off market change of ownership. An issuer sponsored transaction will receive a Security Reference Number (SRN) which will start with an “I” and all details are managed by the company’s nominated subregister.
CHESS (HIN’s) vs Issuer (SRN’s)
A broker sponsored account will consolidate all your shareholdings under one number making it much easier to keep track off. Issuer sponsored shareholdings receive a different number for each company that you invest in.
What is a Contract Note?
When you buy or sell shares you will receive a contract note confirming the trade. This document should be kept for your records. Do not throw it away! It will be needed 20 years later when you decide to sell and need to calculate your capital gains tax liability. These documents are even more important when your Estate is being administered as the Executor will need all the information possible to make an informed decision on how best to wind up your assets and implement your wishes.
What is a share registry?
The share registry manages the list of all the owners of shares in that company. It will handle most of the dealings you will have with the company you have invested in.
The share registry requires certain information from all shareholders:
- Tax file number relating to the shareholder (personal or entity)
- Bank account details to deposit your dividends (Note: Broker sponsored holdings will typically automatically send the TFN & Bank Details on their records to the share registry. You usually receive confirmation of this a few days after the welcome documents when you make your first investment with a particular company)
- Communication preferences so they know how to send you information
You can manage your share registry details online with all the major share registries, such as Computershare, Link Market Services, Boardroom and Advance.
What paperwork will I receive?
When you make your first investment with a company you generally will receive a Welcome Letter and forms to complete asking for TFN, Bank account & communication options or website login information to update this electronically. Going forwards, you will receive:
- Dividend/Distribution Statements when they are declared by the company
- Tax Statements (if applicable)
- Company Reports including Annual Reports
- Company announcements including information regarding the AGM or corporate actions
- Holding statements recording your trading activity whenever a transaction is made.
You can update the communications options with all share registries to receive correspondence by email. However certain changes and notices will always be sent via post. For example changes verifying updates made to personal contact details via the broker or issuer are sent via mail to the registered address.
Records Management
Important paperwork to keep:
- Contract Notes for all transactions
- Corporate Action purchase/sell papers if you have taken the offer
- Holding Statements
- Tax Statements
- Dividend Statements if you are utilising a Dividend Reinvestment Plan
These can be in electronic format, preferably PDF, if you wish to save filing space at home. This information should be kept for at least 5 years after your tax return is lodged once the asset has been sold. For example if you sold some shares in 2016/17 financial year, then the contract notes verifying the buy and sell transactions should be kept until July 2022.
Keep your details up to date
Key information you need to keep up to date includes your Settlement Bank Account linked to your Broker account and your personal contact information eg Address, Email and Phone numbers
Further Reading
If you’d like to do some more in-depth reading on the topic, the ASX website has further details here: ASX First-Time Investor Education
Need some help?
Veritas Wealth Solutions can assist and guide you through the whole share trading process. We are seasoned administrators for all types of investments and well versed on the paperwork and systems needed to manage your portfolio efficiently.
It’s Time to Think About Your Investment Strategy
You’ve made it through the financial year and navigated the new superannuation laws that took effect on 1 July 2017 but there is one thing you should always think about and that’s your investment strategy. There is no better time than right after a financial year ends to review your self-managed super fund’s (SMSF) investment strategy and its performance.
As a trustee you are required to review your investment strategy regularly to ensure it continues to reflect the purpose and circumstances of your fund and its members. An SMSF investment strategy must take into account the following:
- The risks involved in making, holding and realising the SMSFs investments, their expected return and cash flow requirements of your SMSF.
- The diversification and composition of your SMSF investments.
- The liquidity of your SMSF investments, with regard to expected cash flow requirements.
- The SMSF’s ability to pay current and future benefits to the members.
- Whether to hold insurance cover for each member of your SMSF.
An important requirement for you as trustee of your SMSF is to have an investment objective and a strategy to achieve that objective before you start to make decisions about how you want to invest your SMSF’s money.
Whatever assets you choose for your SMSF to invest in, there must be a clear and obvious retirement purpose in the choices you make. Of equal importance is that the investment objective and strategy is not set in stone. Trustees can choose to change the investment objectives they have set for their SMSF at any time.
At the same time looking at current broader economic risks should form part of your decision making. Looking ahead to the 2018 financial year these include whether United States President Donald Trump can succeed on his economic promises, the looming threat of North Korea and the United Kingdom’s pending ‘Brexit’. Domestically, slow wages growth, rising housing costs and a potential interest rate rise from the Reserve Bank of Australia could all weigh in on the economy.
So as an SMSF trustee, your best defence against this uncertainty is to have a clearly defined, well-rounded and long term investment strategy. Not only is your SMSF legally required to have an investment strategy, it is key to guiding you and your fund through uncertain times.
A crucial aspect of an investment strategy is to consider the diversification of your SMSF’s assets. Diversification of your retirement savings across different assets and regions is fundamental to protecting your fund from volatility in financial markets over the long-term.
While it is important to keep track of events that affect financial markets and your superannuation savings, keep in mind that superannuation is for the long-term and that sometimes, short-term decisions can do more harm than good. A good investment strategy that keeps members disciplined and focused on the long-term is essential.
With any decisions you make as a trustee in relation to your fund’s investments strategy and asset allocation, the important things to keep in mind are:
- Try to avoid taking undue risks with your underlying investments, which increases the likelihood of short-term losses. For example, think twice before moving from relatively stable shares to speculative shares even if you think a short-term win will come to your SMSF.
- If the fund is considering payment of an income stream, ensure the cash flow from the asset allocation is sufficient to pay the required amount.
- If there is a relatively long timeframe before benefits become payable from the fund, the potential capital growth of the investment should be considered.
- Consider the effects of inflation and protect against the reduction in the real value of the fund’s investments.
- All trustees and members of SMSFs have a range of attitudes towards risk and how they see their funds’ investments performing over time. When it comes to the fund’s investment strategy and asset allocation it is important to carefully consider its overall risk profile or tolerance, including the impact of asset allocations on the overall investment portfolio.
Your investment strategy does need to be reviewed at least once a year and this will be evidenced by your approved auditor. It is also important to review your strategy whenever the circumstances of any of the members change or as often as you feel it is necessary. The following practical tips will help you keep on top of your obligations:
- Put your investment objective and strategy in writing.
- Set an investment objective that you can achieve with the underlying investments you are comfortable to invest in.
- There is no template for an investment objective and strategy, but make sure they reflect how you intend to invest your SMSF’s money.
- The investments you actually make must be contemplated by the investment strategy you have set.
- Additionally, document your actions and decisions, as well as your reasons, and keep them as a record in order to demonstrate that you have indeed satisfied your obligations as a trustee in this important area.
How can we help?
The financial advisors at Veritas Wealth Solutions can help you formulate, execute and review your investment strategy and needs from inception to retirement as well as answering any questions or concerns you may have. Please feel free to call our office to arrange a meeting to discuss your particular requirements in more detail.