Newsletter

Staff Updates

It is with great pleasure that we advise that on 26^th January 2019, Roshini Suraweera gave birth to a healthy baby girl.  Selena and Roshini are both home and doing very well.

There must be something in the water, because Allison Burman is due to have her first child in August 2019.  She will be going on maternity leave from mid-July, so after then any email queries that you would usually direct to Allison can be sent to admin@veritassolutions.com.au and they will be passed onto the most appropriate person.

Minimum Pension Reminder

As the end of financial year is fast approaching, now is the time for a quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund prior to Friday 28th June 2019. You will find each member’s minimum pension withdrawal requirements in the covering letter that was included with your 2018 financial statements. If you have any questions in regards to your minimum pension requirements, please call our office to discuss with one of our accountants.

STP for All Employers from 1 July 2019

In previous newsletters we have explained about Single Touch Payroll (STP) and the effect it will have on your business. The legislation has been passed through Parliament, so STP reporting will be compulsory for all employers, including small businesses, from 1 July 2019.

The ATO understands that the move to real-time reporting will be a big change for many, particularly for micro employers with 1 to 4 employees who currently do not use payroll software. They wish to reassure you that you will not be forced to purchase software. The ATO is currently working with software providers to develop low and no-cost solutions including payroll solutions, portals and mobile apps. They have published a list at ato.gov.au/stpsolutions which details the current available solutions. If you are a small employer, it is important that you investigate and implement which is the best approach for you.

The ATO have proposed a flexible approach to implementing STP, with reassurance that they understand you may need more time to get the processes right. There will be no penalties for mistakes or missed or late reports for the first year, and any small business who requests additional time will be granted a deferral. Micro employers will be offered the alternative to report quarterly for the first two years through a tax or BAS agent. 

If you have any questions or concerns, you can contact our office or the ATO at 13 28 61 or visit the website for more information ato.gov.au/stp.

Common SMSF Contraventions

The ATO have released figures that out of 8,215 SMSFs lodged for the 2018 financial year so far, there have been 16,909 regulatory contraventions.  50% of these are made up of 3 basic violations – loans to members, in-house assets and failing to keep SMSF assets separate to personal assets. 

The other most common contraventions include related-party loans, investing in related-party assets, failing the sole purpose test and other administrative errors.  Poor record keeping also rated a mention as people attempted to access the low tax rate via their SMSF without keeping proper documentation.

The main drivers of the contraventions tend to be financial stress and the ease with which trustees can access SMSF assets as well as poor record-keeping and the inability to substantiate transactions.

In the 2017-18 financial year so far, there have been 257 trustees disqualified, and 180 other enforcement actions such as notices of non-compliance, enforceable undertakings and directions to rectify.  So far this financial year, 75 trustees have been disqualified.

If you are unsure if you are allowed to invest in certain assets, withdraw money or otherwise deal with your SMSF please check with our accountants or financial advisers before you take action to get the correct advice.  It is much easier to sort out if breaches are avoided altogether.

Financial Health Check

With the end of financial year fast approaching, now is a good time to start thinking about tax planning ideas to minimise your tax liability. There are many different strategies available, dependant on your personal situation. Some strategies may include setting up more tax effective business structures, for example, a company or trust; negative gearing your rental property; or salary sacrificing. These are of course more complex strategies, but they are worth discussing with your accountant, particularly if you are a higher income earner.

One of the more immediate tax strategies you can use is to bring forward any tax deductions that you may have prior to 30 June. Maximising your tax deductions can help to reduce your taxable income and in turn, the amount of tax you need to pay.

Some examples of deductions you may be able to bring forward include:

• Paying rental expenses (including repairs and maintenance)
• Giving gifts and donations to registered charitable organisations
• Paying subscriptions to professional journals
• Paying memberships to professional associations
• Prepaying for business travel, seminars and conferences
• Prepaying insurance premiums or rent on business premises
• Purchasing office supplies and stationery
• Business owners can pay employee’s super contributions into a complying super fund before 30 June
• If you intend to claim work related Motor Vehicle expenses, remember to prepare a log book to document your private and business kilometres travelled for a continuous 12 week period as well as your motor vehicle expenses
• Higher income earners could get private health insurance if they don’t already have it, to avoid the Medicare Levy Surcharge.

All of these ideas require spending money sooner rather than later in order to save money. If your cash flow prevents this or they are not relevant to your circumstances, it is still a good idea to plan and make sure you have all of your necessary tax documents together sooner rather than later. Not only will you then maximise your deductions on your tax, but you will also have your documents prepared in a timely manner so that you don’t get hit with late lodgement fees, and if you do have a tax liability, you have time to budget for it.

Staff Updates

Roshini Suraweera will be leaving us later this month to have her baby and will return later in the year.

We welcome Shammi Wickramasinghe to the team who will take Roshini’s place when she goes on maternity leave. Roshini has been training Shammi for the past month and will continue to do so till she is ready to go.

MYOB AccountRight Desktop to be discontinued

If you are currently using a desktop version of MYOB AccountRight Classic to manage your affairs, please note that beyond 30 September 2019, the product will no longer be updated to be compliant with current tax laws.

For those that want up-to-date compliance and support beyond this date, you will be required to upgrade to a MYOB cloud-based product.  MYOB are currently in the process of informing subscribers, so if you fall into this category, be prepared to receive information on how to upgrade.

Proposed Superannuation Guarantee Amnesty

Under current law, failure to contribute the minimum 9.5% of an employee’s ordinary time’s earnings (OTE) to the employee’s superannuation fund by the required time can result in a liability to pay the Superannuation Guarantee charge, penalties and, where applicable the General Interest Charge (GIC).

The proposed Amnesty provides employers with an opportunity to rectify past SG non-compliance without penalty for a 12-month period. Under the proposal, an employer that has an SG shortfall amount that qualifies for the Amnesty within any period from 1 July 1992 up to 31 March 2018 is provided with the following:

• the ability to claim tax deductions in respect of SG charge payments made and contributions that offset the SG charge to the extent that the charge relates to the SG shortfall
• the administrative component to the SG charge will not apply ($20 per employee to which the SG shortfall applies per impacted quarter)
• part 7 penalties will not apply.

Employers will still be required to pay all employee entitlements, which include the unpaid SG amounts and the nominal interest (calculated at 10% per annum) owed to employees as well as any associated GIC.

To be eligible for the proposed amnesty, you will need to satisfy all of the following:

• voluntarily disclosed amounts of SG shortfall or late payments that have not been previously disclosed for any period from 1 July 1992 up to 31 March 2018.
• made the voluntary disclosure within the proposed 12-month amnesty period (between  24 May 2018 and 23 May 2019)
• The ATO has not previously advised the employer that it is examining, or intends to examine, the employer’s compliance with respect to SG charge payments for that quarter.

However, the proposed Amnesty still has to be passed as law before it will have actual effect. Moreover, there are still a number of serious modifications required to be made in order to make the Amnesty an appropriate basis for employers to come forward with legal certainty.

Consequences of non-lodgement

If you earn more than $18,200, you are required to lodge a tax return. There are some cases you may even be required to lodge, if you earn less than that. Generally, you need to lodge a tax return every year.

If your annual income is below the Tax free threshold, and you didn’t pay any tax, you may not need to lodge a tax return. It is important to advise ATO that you don’t need to lodge a tax return by submitting a non-lodgment advice to ensure they don’t list you as having outstanding tax returns.

Penalties of lodging a late tax return

ATO can issue a Failure to Lodge (FTL) penalty if your tax return isn’t lodged by the due date. This fine is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the return is overdue, up to a maximum of five penalty units. The penalty is normally applied automatically but is not normally applied to returns with either a nil result or which generate a refund.

If you have several outstanding returns, the ATO may issue one or more default assessments.  This is an estimated assessment of your income based on data held by ATO. These estimates are rarely correct and often show a higher tax liability as they don’t take deductions into account. However, you are able to appeal a default assessment.

Will I get prosecuted if I don’t lodge a tax return?

Even though it’s not common, ATO can prosecute for failing to lodge tax returns. Currently, the maximum penalty which can be applied on prosecution is $8500 or imprisonment for up to 12 months.

What should I do if I haven’t lodged my tax returns?

If you have one or more outstanding tax returns, ATO will catch up with you. It’s always a good idea to get your tax returns up to date ASAP.  We can help you minimise the risk by lodging a late tax return on your behalf.

Early Lodgement of Nil Activity Statements

The ATO generally issue activity statements by the end of the month, allowing 21 days for you to complete and lodge your monthly activity statement by the due date or 28 days to complete and lodge your quarterly activity statement by the due date.

Activity statements can be generated early in the following cases:

• if you are going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period;
• you are a short term visitor, for example, an entertainer or sports person and will be leaving the country before generation of the activity statement;
• your entity is under some form of administration;
• your business has ceased; or
• you will be travelling (either within Australia or overseas) and therefore will not be able to obtain your activity statement if generated under normal bulk process

(Note: if you are a quarterly client who has elected to report and pay monthly, you are not eligible for early generation of activity statements.)

Activity statements can be generated for up to six months in advance for either six monthly or two quarterly activity statements.  We can liaise with the ATO on your behalf to assist in lodging nil activity statements early if required.

Tips to Protect Yourself from Scammers

With an increasing number of scammers targeting taxpayers, the ATO is urging people to be aware and vigilant. Reportedly over $800,000 was lost during November with an increase in phone calls, emails and text messages with one elderly person losing more than $236,000 in total.

• The ATO has confirmed that they will not:
• use aggressive or rude behaviour, or threaten you with arrest, jail or deportation;
• request payment of a debt via iTunes, pre-paid visa cards, cryptocurrency or direct credit to a bank account with a BSB that isn’t either 092-009 or 093-003;
• request a fee in order to release a refund owed to you; or
• send you an email or SMS asking you to click on a link to provide login, personal or financial information, or to download a file or open an attachment.

To protect yourself from scammers:

1. Know your tax affairs– you can log into myGov to check your tax affairs at any time, or you can contact your tax agent or the ATO.
2. Guard your personal and financial information – be careful when clicking on links, downloading files or opening attachments. Only give your personal information to people you trust, and try not to share it on social media.
3. If you are unsure about whether a call, text message or email is genuine, don’t reply. Call the ATO on 1800 008 540.
4. Know legitimate ways to make payments – scammers may use threatening tactics to trick their victims into paying false debts in pre-paid gift cards or by sending money to non-ATO bank accounts.
5. Talk to your family and friends about scams– if you or someone you know has fallen victim to a tax related scam, call the ATO as soon as you can.

Staff Updates

It is with regret that we advise that Allison Reid, our Associate Planner, has decided to broaden her horizons and has left our employment. We wish her well in her future endeavours.  Any queries that you would have directed to her can be sent to Tracey O’Brien at tracey@veritassolutions.com.au  or Jodie Dickson at Jodie@veritassolutions.com.au .

Jodie & Tracey will work together to ensure we still provide the same level of customer service.

We are excited to announce that Roshini Suraweera is expecting her first baby, due in late January 2019.

More exciting news, Allison Burman is engaged to be married to a lovely man and they are off to Europe for the whole of October.

$20,000 instant asset write-off extended

On 12^th September 2018, the Senate finally passed legislation to extend the threshold for the $20,000 instant asset write-off for a further 12 months to 30 June 2019.  The extension was announced in the May 2018 budget, however with the delay in legislating the change, small business owners were left open to significant uncertainty whether the measure would apply.

• You must apply all the simplified depreciation rules to claim the instant deduction.  The requirements are as follows:
• Run a small business with turnover of less than $10million
• Write off eligible assets that cost less than $20,000 each
• Pool most other depreciating assets that cost $20,000 or more
• Write off the small business pool balance if it is less than $20,000 at the end of the income year
• Only claim a deduction for the portion of the asset used for business or other taxable uses.

If you would like any assistance in determining if this applies to you, please contact our office.

Can your Company access the 27.5% tax rate?

On 23^rd August 2018, Parliament passed legislation confirming which companies are eligible for the lower company tax rate.   Company turnover must be less than $25 million in 2017-18 and less than $50 million going forwards.  From 2017-2018 financial year, a ‘bright line’ test will determine eligibility.  Under this test, a Company that receives more than 80% of its assessable income in passive forms will not be eligible for the lower tax rate.

Examples of passive income include:

• Corporate distributions/dividends and their franking credits
• Interest income from other investments (not from banks)
• Royalties (including licence fee income)
• Rent
• Net capital gains

This becomes more complicated when the Company is a beneficiary of a Trust, as the Company is taken to have received a certain percentage of the total income of the Trust.  Therefore the Trust must calculate the passive and non-passive assessable income it has earned so the Company can assess whether it is eligible to access the lower tax rate.  This is the case, even if the Trust decides to stream only business income to the Company.

Expenses must be apportioned against the income received in order to calculate the assessable passive income and the assessable income from other sources.

Keeping your ABN up to date

Did you know that it is your responsibility to make sure that your ABN details are kept up to date? Any changes made to your ABN, including your contact details and address, must be updated with the Australian Business Register (ABR) within 28 days of the change. This is a service that we can provide for you. If you know of any changes to your ABN, please contact the office so that we can update the ABR on your behalf. Likewise, if you are unsure if your details are up to date, we can check with the ABR to see what details you have registered with them.

If your business has been sold, closed down, or is no longer operating in Australia or making supplies connected with Australia, it is important that you cancel your ABN. When you cancel your ABN, the following registrations will also be cancelled: goods and services tax (GST), luxury car tax (LCT), wine equalisation tax (WET) and fuel tax credits (FTC). Before you cancel your ABN, you need to make sure you have met any lodgement, reporting and payment obligations with any government agencies you deal with. If you would like some further advice as to whether or not you should be cancelling your ABN, please contact the office and we can discuss your particular needs.

Excess Franking Credit Refunds

The refund of excess franking credits has been available since 2000. Many SMSF trustees and individuals have become accustomed to receiving a large deposit into their bank account at the end of each financial year. If Labor’s proposed changes to dividend imputation become law, the refund will be a thing of the past and trustees and individuals may need to rethink their investment and tax planning strategies.

Franking credits will still be beneficial for superannuation funds and individuals that have taxable income as the franking will reduce their tax liability. However, funds, especially those paying a pension, or individuals who have little or no tax payable and currently receive a refund will be the ones that lose out the most.

A flaw in the policy proposal is that the burden of the extra tax will affect only certain groups of investors or Super funds. Most large industry and retail funds will generate enough income from contributions and investment earnings to use their franking credits and pass on the benefit to those members. This creates the unfair situation where two investors with the same investments, one in an SMSF and one in an industry or retail fund, will be treated differently.

What can SMSFs do to reduce the impact?

Given the possibility that Labor will be in power by this time next year, SMSF trustees and their advisers are already contemplating strategies to limit the effect of the potential change. These strategies include:

• Changing the investment mix to include investments that don’t provide a franking credit such as property trusts, overseas investments, and companies that pay unfranked dividends.
• Many high net worth super fund members currently receive a pension simply to reduce the tax liability of their SMSF and not because they need the income. In future, this strategy may simply increase the amount of franking credits that are lost, and members may leave their superannuation in accumulation.
• Children who are making taxable superannuation contributions may join their parents’ SMSF. The taxable income of the fund will rise and use up some of the excess franking credits.

If any of these strategies are relevant to you, or you would like further information, please contact one of our advisers, Jodie or Ken.

Scam alert!

The ATO has reported a new phone scam where a scammer calls up and pretends they are from the ATO.  They advise that you have an outstanding debt and that you will go to jail if you do not pay it.  The poor victim provided his tax agent’s phone number to the caller, who then dialled in another scammer who pretended to be the tax agent for a 3 way conversation.   The “tax agent” confirms the debt, so the victim withdraws the money and pays it in the manner requested – a bitcoin machine, iTunes cards etc.  They may leave you a voicemail if you don’t answer, do not call them back.

The ATO provides the following indicators to identify a scammer:

• They will tell you a complaint has been made against you and you are committing tax fraud or claim that you have to pay a debt that you know nothing about.
• They may threaten immediate arrest or court if you don’t call them back or pay straight away.
• They won’t provide explanations or allow you to ask questions about the debt and often get aggressive or abusive.
• They will ask you to pay using unusual methods of payment that the ATO does not use such as iTunes, Bitcoin cryptocurrency, store gift cards or pre-paid visa cards.
• They may offer a tax refund but you have to provide a personal credit card number for the funds to be deposited into. They don’t deposit money but instead steal funds from these cards without the knowledge of the cardholder. The ATO does not issue refunds to credit cards.

Know the status of your tax affairs. If you are aware of the details of debts owed, refunds due and lodgments outstanding, you are less likely to fall victim to a scam.  If in doubt, call our office first and we can check it online.

2018-19 Personal Income Tax Changes

From 1 July 2018, the 32.5% income tax bracket ceiling increases from $87,000 to $90,000.  All other thresholds remain the same.  By 2024, the Government plans to have removed the 32.5% tax bracket complete.

The Government has introduced a new Low and Middle Income Tax Offset of up to $530 from 1 July 2018 which will be refunded to individuals when they submit their 2019 income tax returns.  It is calculated as follows:

The minimum HECS-HELP repayment threshold has been changed.  From 1 July 2018, those earning between $51,957 and $57,729 will have a minimum repayment of 2%, with payments increasing up to 8% as taxable income increases.

The concessional contributions of $25,000 remains the same, as does the non-concessional contributions cap of $100,000.

For further information on any changes, please contact our office.

Change to SMSF auditing procedures

We wish to ensure all of our SMSF Trustees are aware that we have decided to engage an external SMSF auditor to enable us to focus on SMSF strategy, as well as providing the financial statements faster and providing better service to our clients.

As such, there may be a few extra documents which we request from you for the 2018 financial year.  If it has been several years since you got your rental property valued, please arrange a new valuation as soon as possible.  If you manage your own permanent file (or SMSF register), please ensure your trust deeds and amendments are signed, that your ATO member application and trustee declaration forms are signed and easily accessible.  SMSF Trustees must also have a fund investment strategy in place and minutes showing that you have reviewed it regularly (at least annually) and revised the strategy if required.

If you have any questions or concerns please don’t hesitate to contact our office.

Holiday Travel

If you are one of our SMSF clients and you’re heading away on holidays for more than 2 weeks, please call or email our office to let us know.

We are working on the 2018 -2019 SMSF accounts and if we know that you will be away for a certain amount of time during the year, it will be easier to plan around your leave if we have advance notice.

Common Tax Time Mistakes

The ATO has recently released the top 5 mistakes that people make when lodging their individual tax returns.  These are:

• Leaving out some income – from a temporary/short-term job or from Airbnb or Uber which the ATO now data match
• Not keeping receipts or records for your expenses
• Claiming deductions for personal expenses like home to work travel, personal phone calls or normal clothing
• Claiming personal expenses for rental property you are using yourself, or interest on loans for personal assets
• Claiming deductions for items that you never paid for – there is no such thing as a “standard deduction”

If you are unsure about whether you can claim a deduction or should report some extra income, please call our office and speak to one of our accountants.

Event Based Reporting for SMSFs

From 1 July 2018, all SMSFs are required to report specific events to the ATO via a new report called the Transfer Balance Account Report (TBAR).

If all members of the fund have less than $1million then this report can be lodged with the annual tax return, otherwise these must be lodged within 28 days after the end of the quarter in which the event occurred.

Events that must be reported include details of any new pensions commenced, any commutations of pensions, any personal injury contributions and some limited recourse borrowing arrangements.  SMSFs do not need to report pension payments, investment earnings or losses, when a pension ceases because it has a zero balance or the death of a member.

Veritas Wealth Solutions has already submitted the required reports advising the ATO of the opening balance of all pensions at 1 July 2017 and we will be working hard to ensure that we assist the Trustees of all full service clients to comply with the new reporting requirements.

If you are not a full service client and you require any assistance in fulfilling your reporting obligations, please contact our office.

Register your business name by October 31

By 31st October 2018 all businesses will need to register all trading names as a business name with ASIC in order to continue operating with it. ABN Lookup will only display business names registered with ASIC from this date.

Most businesses will need to apply for a registered business name with the Australian Securities & Investments Commission (ASIC).

You can carry on a business in your own name without registering a business name if you don’t change or add anything to your name. For example, John Smith doesn’t have to register a name to trade as J Smith or John Smith, but he does to trade as John Smith Landscaping.

To apply for a registered business name you will need to have applied for or have an ABN.

2018 Tax Time

Now that the 2018 financial year has come to a close it’s time to start thinking about lodging your tax returns. Our firm not only specialises in Self-Managed Super Funds, but we also prepare personal tax returns, business returns, unit/family trusts, and can lodge Business Activity Statement’s. We have found that for most of our SMSF clients, it is simpler and less complex for you if we prepare your personal tax returns at the same time that we prepare your SMSF accounts. If you would like us to prepare any of your returns, or would like a quote for our services, please contact the office on 02 6162 1522. We are more than happy to help with any of your tax requirements and can provide you with personalised tax advice when requested.

Staff Updates

We are very pleased to welcome Roshini Suraweera to our team of accountants.  Roshini is a qualified member of CPA Australia and is available to contact by email at roshini@veritassolutions.com.au from Monday to Friday.

Ken Wild will be on leave for seven weeks from Tuesday 29^th May 2018 and returning to the office on Monday 16^th July 2018.  Any enquiries including administration or financial advice during that period will be looked after by our qualified and capable staff.  This includes Veritas business owner and Certified Financial Planner Jodie Dickson and supporting staff Allison Reid (Associate Adviser) and Tracey O’Brien (Client Services Manager).

Single Touch Payroll

STP is the next step in simplifying your payroll reporting.

The ATO stipulated that mandatory STP reporting commence for businesses with 20 or more employees on 1 July 2018.

All businesses with 19 or less employees can decide to report via STP from 1 July, 2018. However ATO proposed that it will be mandatory for employers with 19 or less employees to commence reporting from 1 July 2019 subject to legislation being passed in parliament.

STP will lead to transparency in payroll reporting and level the ground to ensure that all employees are meeting their employer taxation obligations. Auto reporting, Activity statement compliance efficiencies and validated new hire data are some exciting advantages of STP.

Main changes for employers and the payroll process due to STP reporting are;

• You’ll be reporting payroll and super information to the ATO every pay run. This is no longer an end of year process.
• Employer may not need to provide employees with payment summaries at the end of a financial year and employees can access that information through myGov account.
• There will be some changes to how superannuation is reported to the ATO, but no change to the way superannuation is paid.

Furthermore, your payroll cycle and payment due dates for PAYG withholding and superannuation contributions will not change. Employers can continue to pay employees weekly, fortnightly or monthly.

You need to count the number of employees on your payroll on 1 April 2018 and if you have 20 or more, you will need to update your software when it is ready and start Single Touch Payroll reporting from 1 July 2018. Software providers such as MYOB, XERO and ELMO Cloud are working directly with the ATO to ensure that their clients are ready to go when it becomes mandatory on 1^st July 2018.

SMSF minimum pension reminder 2018

A quick reminder for our SMSF trustees about the importance of withdrawing the minimum pension amount from your superannuation fund before Saturday 30th June 2018.  You can find each member’s minimum pension withdrawal amounts for 2018 in the covering letter we included with your 2017 financial statements.  If you have any questions to do with your minimum pension requirements please call our office to discuss with one of our accountants.

Working Holiday Makers

Any employer can hire a working holiday maker, especially if they need labour for a short period of time.  Most people believe that working holiday makers are all fruit pickers or farm labourers, but the majority of them work in pubs, clubs and in retail.

In order to employ a working holiday maker in Australia, you must register with the ATO as a Working Holiday Maker Employer before you make your first payment to them.  Penalties apply if you fail to register.

You will need to identify the person as a working holiday maker by checking their visa.  They will hold either a Working Holiday visa (417) or a Work and Holiday visa (462), which you must verify online using the Visa Entitlement Verification Online service.

Working holiday makers can’t claim the tax-free threshold and they must provide you with their tax file number.  If they don’t provide you with a TFN you must withhold tax at the highest rate.  You must withhold tax at 15% from the first dollar they earn up to $37,000 regardless of their residency status.  Other tax rates apply beyond that amount.  Working holiday makers are also entitled to superannuation if they earn above the usual thresholds.

If you would like further information, please contact our office.

Are foreign residents eligible for a CGT discount on Australian Property?

Up until the 8^th May 2012, foreign residents were eligible to a 50% CGT discount on the sale of an Australian property. If the property was purchased after 8^th May 2012, the discount is not available to foreign and temporary resident individuals (including beneficiaries of trusts and partners in a partnership).

If the property was purchased prior to 8^th May 2012, but the CGT event didn’t occur until after this date, the CGT discount is apportioned to the percentage of time the property was owned prior to the 8^th May 2012; or if you had a period of Australian residency after that date. Any CGT events that occur prior to 8^th May 2012 are not affected.

The 2017 budget also introduced the following changes to the main residency exemption whereby it denies foreign and temporary tax residents access to the CGT main residence exemption from 7:30pm (AEST) on 9^th May 2017. This change has been grandfathered until 30^th June 2019, and if the CGT event occurs after this date, the individual is able to pro rata the main residence exemption.

Invoice Payments

When paying invoices via EFT please be sure to use the invoice number as a reference description.  Also please check the account number and BSB matches the details on our invoice.

Scam Alert!

A new email is doing the rounds, pretending to be from the Australian Taxation Office (ATO).  An example is below.  This is not a legitimate request from the ATO.  If you receive an email like this, do not click on the links, do not provide any personal details and delete it immediately.

Staff Updates

We are very pleased to welcome Holly Barnes to our team of accountants.  Holly comes to us with 12 months experience, after graduating from University of Canberra in June 2016.  She is available to contact by email at holly@veritassolutions.com.au from Monday to Wednesday.

We are also excited to advise that Tracey O’Brien has changed teams in our office.  She will no longer be working on accounts and tax but instead, will use her considerable experience with our clients to assist the financial planning team in the administration assistant role.

Watch this space for the introduction to our new accountant in next quarter’s newsletter.

back to top

Income Tax Lodgement extension for SMSFs

This week the ATO has announced that lodgement due date for self-managed superannuation funds for the 2016-17 financial year will be extended to 30^th June 2018 in light of the new complicated super reforms.  As 30^th June 2018 is a Saturday, the SMSFs can lodge their returns up to Monday 2^nd July 2018 without penalty

back to top

Taxable Payments Annual Report

Currently, if your business is in the building and construction industry, you must report payments that you make to contractors if you pay them for building and construction services and you have an ABN.  This is to ensure that the contractors themselves report their income properly to the ATO when they prepare their own income tax returns.

This existing reporting requirement is presently only applied to the building and construction industry, but that is about to change.

Effective from 1^st July 2018, this reporting requirement will be applied to businesses in the cleaning and courier industries as well.  

Courier services include activities where items or goods are collected from and delivered to any place in Australia, using all methods (car, truck, motorcycle, pushbike, on foot etc).  It does not include bus and taxi services, transport of blood or freight transport.

Cleaning services include businesses that undertake any of the following activities on a building, residence, structure, place, surface, transport/vehicle, machinery or equipment and for events:

• Interior and exterior cleaning (except sand blasting or steam cleaning)
• Carpet cleaning
• Chimney clearing and gutter cleaning
• Road sweeping and street cleaning
• Swimming pool cleaning; and
• Park and park facilities cleaning

Businesses in these industries will need to collect details of payments made to contractors from 1 July 2018 and then report to the ATO in their first annual report for the year 1 July 2018 to 30 June 2019 which will be due 28^th August 2019.  You will need to provide the contractors ABN, name, address, the gross amount you paid them for the financial year including GST, and how much GST is included in the gross amount you paid.  You must report the amounts that you actually paid to the contractors (eg don’t include invoices you haven’t paid them for yet).

If you are in these industries, then you will need to put systems in place to ensure correct collection of information.

Transparency of Tax Debts reporting

The ATO will begin reporting tax debts to credit reporting agencies under specific circumstances as soon as new legislation receives Royal Assent.

The measure is designed to support informed decision-making in the business community by making unpaid tax debts visible so credit providers and business can properly assess the credit worthiness of a business.  It is also designed to reduce unfair advantage of business that do not pay their tax on time and encourage those businesses to engage with the ATO to manage their debts.

1. There are 3 criteria that must apply before a debt will be reported:The business must have an ABNThe business must have a tax debt of which at least $10,000 is overdue by more than 90 daysThe business has not engaged with the ATO about the debt, either by arranging a payment plan or disputing the debt
2. Businesses will be notified 21 days before the tax debt is reported for the first time, in order to provide the opportunity for them to take action to prevent it being reported.   Once the tax debt is reported, the ATO will provide regular updates to the credit reporting agencies on the remaining balance.
3. The easiest way to avoid being reported is to pay all tax debts on time.  Alternatively, contact the ATO to set up a payment plan.

What Happens if My SMSF is Deemed to be Non-compliant?

When an SMSF is found to be non-compliant there are a number of penalties that can be imposed, none of which are good news for the super fund or the trustees.

Firstly, the fund will be taxed at the highest marginal rate of 45% as opposed to the standard 15%; as well as the entire fund income being classified as taxable, even if it is in pension phase. The ATO can then charge interest on the tax payable, which can, in some cases, be greater than the original 45% tax charged to the super fund. Excess contributions can also be taxed at a massive 93%.

Secondly, you can be disqualified, suspended or removed as a trustee. This process means that you will no longer be able to be a trustee of a SMSF. On top of this, the assets of the SMSF may be frozen until the non-compliance is revoked.

Lastly, there may be civil or criminal penalties through the courts, depending on the seriousness of the issue.

Here at Veritas Wealth Solutions, we try to ensure that all of our clients remain compliant; however, it does mean that we need your help by providing the appropriate documentation in a timely manner. As a trustee of an SMSF, it is your responsibility to make sure your annual return is lodged to the ATO before the due date, as well as operating the fund in accordance with your trust deed and the superannuation regulations.

If you have any concerns about whether or not your super fund is at risk of becoming non-compliant, please make an appointment to discuss your situation with our qualified staff.

back to top

What documents should you keep for tax purposes?

In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your personal circumstances. If you are not sure, it is better to keep too many records than not enough.

• You should keep enough documentation:
• To provide written evidence of your income and expenses;
• To ensure that you are able to claim all of your entitlements;
• In case the ATO requires you to prove the information in your tax return; and
• To minimise the cost of managing your tax affairs.

Types of records you should keep:

• Income received – Example: payment summary, interest income, dividend statements, statements from managed funds, government benefits & pensions, and rental property income;
• Expenses related to income received – Example: car – kilometres travelled or log book, receipts for other travel, uniform & dry cleaning receipts, invoices for self-education and rental properties expenses;
• Contracts for the purchase and sale of an asset – shares and real estate – Example: contract notes, corporate actions, purchase & sale documents, holding statements, tax statements, dividend reinvestment statements;
• Receipts for donations

We recommend that you keep a copy of your documents, either electronically or paper, for at least 5 years from the date you lodge your tax return.

back to top

New Year: smart saving tips

The New Year is the perfect time to think about what you want to achieve in the next 12 months and beyond.  It’s also a great opportunity to think about whether your circumstances have changed, or will be changing, and how this might impact your financial situation.  You are more likely to achieve your goals, whether they be financial or personal, if you have a plan.  As the saying goes, fail to plan – plan to fail.

Sorting out your finances doesn’t have to be complicated, as even small savings can add up over the year.

Here are some tips to help you get started.

Write down your financial goals and current spending

Make a note of where you’d like your finances to be this time next year. Now jot down your income and expenses for the last month. How much is left over? Are your goals realistic? It’s only by taking a close look at your current financial situation that you can begin to take control of it.

Most banks can show you how you spend your money. Make use of this feature to see where you spend each month to help you work out where you can make cuts to meet your goals.

Make a list of your lifestyle wants and needs

If you want to save or invest more money this new financial year, you may need to consider whether there is anything that you’re willing to sacrifice to get ahead. Do you really need to update your smartphone again? Do you have to buy a coffee everyday? It all adds up.

Build a budget

To get the most from your money, build a budget and stick to it. However finding the right balance is key. If you make your budget too restrictive you’ll likely break it. Alternatively, if you make it too light you might miss out on some financial benefits. And don’t worry if you’re not a fan of spreadsheets; there are a range of digital tools to help you organise your finances. Look at moneysmart.gov.au for a range of budget planners, calculators and apps available.

Track your spending

Once you have a budget, it’s important you stick to it. That means tracking your expenses. A great way to do this is to use a digital money tracker such as the TrackMySpend app from moneysmart.gov.au.

Review your regular expense plans

Review your plans and regular outgoings to ensure you’re getting the best possible value for your money. There are a range of websites that provide direct comparisons of different suppliers offering mobile phone, internet, pay TV and utilities plans.

Sort out your super and consider the caps

If you haven’t sorted out your super yet, now is a good time to do it. If you have multiple super accounts, finding and consolidating them in the one account could help you cut down on fees and grow your money faster with compound interest.

Before consolidating your super you must consider a few important points, such as weighing up benefits and insurance options, comparing the fees and checking potential tax and preservation implications. In addition, if you intend to claim a tax deduction for certain personal contributions, ensure your ‘Notice of intent to claim a deduction for personal contributions’ is made and is acknowledged by the existing fund before combining.

To boost your balance, consider setting up additional regular contributions. Depending on your income, you may even qualify for government co-contributions.

Before you decide to invest more in super, you need to be aware that restrictions and caps apply to different contribution types. Penalties may apply if you exceed the relevant cap or contribute to super when you were not eligible to contribute. You also need to consider that amounts contributed to super generally can’t be accessed until you reach your preservation age and retire or meet another condition of release. Therefore, unless you’re saving for your retirement, you’ll need to consider other options.

Review your insurance cover

Make sure you are getting the best deal with your current general insurance policies such as House and Contents and car insurance.  Update your home and contents cover if you have made changes to your home or purchased new items.  Review regularly the home value covered, building prices can go up significantly year on year and you want to make sure the cover will not leave you grossly underinsured.  It is easy to get quotes online or over the phone to check if your policy is cost competitive for the features you need.

For personal insurance, it is important to make sure the cover you have is adequate for your current situation.  This should be reviewed every few years or if a major life event has occurred, for example, marriage, a new child or increase in debt obligations.  The majority of Australian’s are underinsured for temporary or permanent disability and death.  Considering the average family debt is now over 200% of household income that puts most Australian families into significant distress if something unexpected occurs (hence the need also to build an emergency fund!).

Pay off debt

If you’re paying off multiple debts with a range of interest rates, you should consider the appropriateness of prioritising paying down the debt with the highest interest (while continuing to meet your repayment obligations in relation to your other debts). Alternatively, you may be able to combine your debts with a debt consolidation loan. If you can continue to make the same level of repayments, this may significantly reduce the amount of total interest payable and help you pay off your debt sooner, however you must be disciplined in your repayments.  Often consolidation, due to longer loan terms, can be more expensive over the long run if you continue to pay minimum repayments.

For those with large credit card debts and find them difficult to manage, cut them up, pay them off.  There are alternatives to using credit cards, Visa/Mastercard debit cards most banks offer on transaction accounts, prepaid Visa/Mastercard gift cards and newer payment providers such as Apple Pay, Google Pay and PayPal which you can set up using your own funds.

Start building an emergency fund

Having approximately three months of living costs put into a high interest savings account that is not easily accessible is a great buffer to have when something nasty strikes.  Building an emergency fund should be on everyone’s money goals list.  It provides peace of mind knowing you don’t have to borrow funds or incur additional stress during a time that may already be difficult.

Review your investments

Review your investments regularly. Check that your asset allocation and level of risk are appropriate for your age and plans. A financial adviser can help you understand and manage your portfolio more effectively.

Continue your financial education

Improving your financial knowledge is something we should all do and understanding the financial world will empower you to make better decisions for you and your family.

Moneysmart.gov.au has excellent resources available for all phases of life and are trying to improve the financial literacy of our children by providing excellent teaching resources.  The more we can help children understand the basis of finances, the better prepared they will be when they become independent adults.

Get financial advice – how we can help

Financial advice is about far more than just making money. It’s about creating new opportunities to help you achieve whatever you desire in life.  Our financial planners can help you work out what’s important to you and help you develop a plan that aligns your financial decisions to your lifestyle goals.  Whilst there are many things you can do yourself, receiving advice from a professional can help you stay on track and assist with the more technical complexities involved in financial planning.  We believe in having long term partnerships with our clients to help them navigate the financial ups and downs of life and have expertise in assisting clients with money management, growing wealth (including superannuation), retirement planning, taxation and estate administration services.

Please contact our office on 02 6162 1522 to make an appointment to discuss how we can help you with your financial goals.

Gift Vouchers Now Available @ Veritas – Help your children and friends reach their financial goals

Gift vouchers are now available from Veritas Wealth Solutions for an initial consultation session (usually 60 – 90 minutes) with Certified Financial Planner Ken Wild (a cost of $220).  An initial consultation will help your children and friends plan for their future in setting financial goals and developing plans on how to achieve them.

Please contact our office if you would like to organise a voucher.

Disruption and the future of Energy

The following link is something we found could be of interest to all.

Staff Updates

It is with regret that we advise that Rose Geary, our financial planning assistant, has decided to pursue other opportunities and has left our employment.  We wish her well in her new career direction.  Any queries that you would have directed to her can be sent to Allison Reid at allison.reid@veritassolutions.com.au.

Monica Morabito has also decided to leave our team in order to focus on her family.  She will remain with us until the end of October.  After then, any questions you may have can be directed to Allison Burman at allison@veritassolutions.com.au.

Watch this space next quarter to be introduced to our new team members.

Simple Fund 360

As many of our SMSF clients know, we have been converting our accounts processing from desktop to cloud software using the same provider.  The new software has lots of new features which we will begin using to provide you the best service available.

If you haven’t been sent a bank data authority email as yet, be prepared to receive an email or letter (it’s definitely legitimate!) with some forms attached which we would like you to sign.  The forms allow your bank to directly transfer the transaction history to the cloud software, which will allow us to speed up the process of preparing your end of year accounts.

These forms do not allow us to transact on the accounts, we simply get a list of what has gone in and out – like a standard bank statement but in electronic form.  If you have any questions though, please don’t hesitate to contact our office for further information.

Scam Alert!

If you get a phone call from a person from Microsoft who tells you there is something wrong with your computer, do not give them any personal information and do not give them access to your computer.  Microsoft will never call you to advise you have an issue, they would expect you to call them.  If the call is legitimate, they will provide a reference and when you call the main line, you can speak to anyone about it using the reference they give you.  Most likely, the scammers will hang up when you insist on a reference number.

Another common scam involves callers who identify themselves as working for the ATO or Centrelink and advising you have a debt that can only be cleared with a ‘release fee’ or a ‘fine’ that can only be paid using iTunes gift cards.  These phone calls sound legitimate but be sceptical!  Ask for a reference number so you can call the main ATO or Centrelink phone number and call them back.  These are also not legitimate.  You will never be asked by the ATO or Centrelink to pay a debt using gift cards.  There are also scammers pretending to be from Telstra advising they are trying to catch a hacker who will try to get you to buy iTunes gift cards.

The final warning for this quarter, are unknown numbers who call you and ask is this “your name”.  When you say “yes” they record your voice and use it to agree to contracts over the phone such as contracts with Telstra for a new phone.  As the voice print they use to say “yes” is your voice, it is very difficult to prove that you were not the individual who entered the contract.  When answering calls from unknown numbers, if they ask if it is you, reply with “it is, who is this?”.  Try not to say yes to them.

Important Macquarie Cash Management Updates

Adviser Initiated Payments

Are you having trouble using online banking and need to organise a payment from your cash management account?  We now have the ability to initiate a payment on your behalf.  This may be handy if you are having trouble with internet access or do not like to use online banking.

How does it work?

Our office can setup a Bpay or an Electronic Funds Transfer (also known as Pay Anyone) payment on your behalf.  When the payment information is submitted, your mobile phone will receive a SMS with the details of the transaction and the code needed to approve the transaction.  You would then call our office and verbally tell us the code and we then authorise the payment.  You will receive an email and SMS confirmation of the payment.  The authorisation code cannot be sent via email or SMS.  We must talk to the individual that is sent the code.

We can set up future and recurring payments too if you need them.

What information do we need?

First and foremost, Macquarie Bank need your mobile number and email address to be up to date on their system.  You can call Macquarie on 1800 806 310 to check your details and update them if necessary.  This can take up to 48 hours to update on their system.

Once that information is up to date our office would need the following details from you to setup the payment transaction:

• Amount to be paid
• Bpay or Account details to where the payment is going – Account name, BSB, Account Number or Biller Code & Bpay Reference number

Note:  we do not have authority to transact on your super fund cash accounts.  This feature only allows our office to setup the payment and approve it with your permission.

Nominate a linked bank account for large fund transfers

Macquarie have a daily limit of $20,000 per day for electronic fund transfers.  This limit can be increased by calling Macquarie when the need arises.  However for regular large payments we would recommend you add a Nominated linked bank account.  Once linked to your Macquarie CMA, there is no daily limit for electronic banking transfers to your nominated account.  To add a nominated account you can do this over the phone by calling Macquarie on 1800 806 310.

Two factor authentication starting from 3^rd October

Macquarie Bank have implemented two factor authentication to verify your internet banking transactions.  This will start on the 3^rd October for older bank accounts, new accounts opened more recently (e.g. within the last 18 months) will already have this in place.

How does this work?

When you request a payment transfer, to confirm your identity, the bank will send a secure code to your registered mobile number before you can make a transaction.

What you need to do?

You will need to make you have registered for two-factor authentication (2FA).  Follow this link https://www.macquarie.com/cmaregister to find out more on how to do this.  The step by step user guide available here is also worth reading as it provides good detail on how to best use the Macquarie online banking system.

Super Reforms – Concessional Contribution Changes from 1 July 2017

From 1 July the concessional cap has been reduced to $25,000 per annum.  Concessional contributions are made up of Employer contributions (minimum rate is currently at 9.5% of salary), salary sacrifice (if available) or personal contributions claimed as a tax deduction.

Defined Benefit funds – Major change to what is included as a concessional contribution

For public service employees who are members of a defined benefit fund such as the CSS, PSS or Military Super, the amount of super that is allocated to your concessional cap is more complicated from 1 July.   It now includes notional taxed contributions plus productivity payments and any salary sacrifice/personal deductable contribution amounts you have made.

CSS, PSS & Military super all offer estimators to work out your new concessional cap amount.  Unfortunately for CSS & PSS, this estimator appears to be only available behind a member online services login and there is no access to the general public, making it difficult for financial advisers to assist their clients.  We encourage all clients who are in the accumulation phase of their life to login and check their concessional cap estimate, particularly if you are making additional salary sacrifice/personal deductible contributions.  You will need to check that you will not go over the newly reduced $25,000 cap.

The Commonwealth Superannuation Corporation who manages these funds has put out some excellent fact sheets.  These are available on each scheme’s website under “Super Changes”.

https://css.gov.au/super-changes/

https://pss.gov.au/super-changes/

https://militarysuper.gov.au/super-changes/

Travel Deduction Changes for Residential Rental Property

From 1 July 2017, travel costs for individual investors inspecting, maintaining or collecting rent for residential rental properties will no longer be deductible.  Travel costs will also not be recognised in the cost base of the property for CGT purposes.

This is an integrity measure to address concerns residential investment property owners are not correctly apportioning travel deductions or are claiming travel costs that are for private travel purposes.

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.

back to top

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.

back to top

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.

back to top

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.