DIY Super For Dummies, don’t call us DIY super trustees!, how to find independent financial advice, buying overseas property, saving your family a tax bill, and more.
Welcome to the October 2009 edition of SuperGuide newsletter, a free and independent source of superannuation information for consumers. Coinciding with the release of my latest book DIY Super For Dummies (Wiley), this month’s SuperGuide is a special DIY super edition.
If you don’t run a DIY super fund, then we haven’t forgotten you. We tackle the holy grail of super and retirement planning: how do you identify whether a financial adviser is independent? We also include some interesting Q and As, including whether super benefits count towards the family tax benefit income test. We explain how the contribution limits apply to public servants and we highlight a nifty contribution strategy that can save your family a hefty tax bill. Click on the newsletter links below to find out the answers.
And here’s the DIY SUPER highlights of this month’s SuperGuide newsletter:
- THE SOAPBOX: DEBUNKING THE DIY SUPER MYTH. Tsk! Tsk! Tsk! Don’t call them DIY super trustees because they can’t really do everything themselves, can they? If you run a SMSF, is it possible to steer your own super C-A-R-T (compliance, administration, reporting and tax management) obligations without expert assistance? Well, yes . . . and no. Read about your super CART options – do everything, do some of it, or outsource everything: but whatever you do, you must accept reponsibility.
- POPULAR DIY SUPER Q and As. Can a SMSF invest in property (yes!), and if they can, is it possible for a SMSF to invest in direct overseas property? What about investing in options, and heaven forbid (!), CFDs? Can a SMSF trustee invest in a related private company? Click on the links below to find out the answers.
- ARE SMSF AUDITS TOO EXPENSIVE? A SMSF trustee has no choice but to appoint an approved auditor to review the fund each year. Is there scope for SMSF trustees to be ripped off? One of our readers thinks so.
- RECONTRIBUTING CAN MEAN LESS TAX FOR YOUR FAMILY. A popular strategy that’s still available is recontributing super benefit payments. You can find out more by clicking on the newsletter links below.
COMING UP!
NOVEMBER EDITION: The Australian Government Actuary is expected to release UPDATED life tables in November. If all goes to plan, I will be providing updated life expectancies on the SuperGuide website and some handy articles on how your life expectancy influences your retirement planning, and how you can use this information to your advantage. We have been inundated with super questions since we started SuperGuide newsletter six months ago, and since we officially launched the website in January 2009. In the November and December editions, we will expand our Q and A section and feature the most popular questions we have received over this year.
DECEMBER EDITION: The last SuperGuide edition for the year will be a bumper edition covering the latest news on super including an update on the Government’s super reviews, in particular, the Cooper Review (Review into the governance, efficiency, structure and operation of Australia’s superannuation system). For those readers who use the Summer holidays to plan for the following year, we will be outlining some of the more popular strategies available to boost your super accounts. We will also be providing an expanded Q and A section to cater for the many questions our readers send to us, including a special feature for our overseas/expats readers who want to find out how to access Australian super benefits or move benefits back to Australia.
If you like this newsletter and our website, then please pass on the newsletter to your friends and encourage them to sign up for SuperGuide newsletter. As consumers, we have more influence with decision-makers when we speak as a group.
Trish Power
THE SOAPBOX: Debunking the DIY Super Myth
The practice of calling self-managed super funds, ‘DIY super funds’ upsets the regulator, and also concerns many of the service providers making a living from helping individuals set up, and run, self-managed super funds (SMSFs). The key message emanating from the SMSF industry is that you can’t possibly do it all yourself.
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FEATURES
Independent financial advice: how do you find it?
Q: My husband and I are looking to start a SMSF and roll our industry funds into it. We have been able to find sources for the set up, accounting and audit of the fund and are now looking for assistance on the portfolio. We have a share portfolio outside super and so have some knowledge in the area but do not feel confident to make decisions about our whole super.
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Do you fit the profile of a typical SMSF trustee?
The latest ATO statistics on SMSFs (representing SMSF activity up to the end of June 2009) highlight some interesting observations that can be made about the current batch of SMSF trustees. Although, attempting to slot nearly 775,000 trustees running more than 410,000 SMSFs into a box called ‘typical’ is an impossible task, the statistics do shed some light on the ages of SMSF trustees, state of origin, gender balance and income levels.
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SMSF trustee declaration: a quick guide
When setting up your SMSF, you must sign a SMSF trustee declaration that confirms you understand the responsibilities and duties involved in running a SMSF. If you have set up a DIY super fund in the past 18 months or so, then you would be familiar with the SMSF trustee declaration.
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Are SMSF audits too expensive?
Q: I have noticed that SMSF auditors and administrators are charging what appears to be rather high costs, perhaps because of the mandatory nature of these audits. I have also noticed some online providers, including one that flatly refused to provide me with the name of their auditors. I wondered if through SuperGuide there would be an opportunity to offer more financially viable audit options through providers that are firmly placed in the community with appropriate reliability, integrity and transparency.
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POPULAR DIY SUPER Q and As
SMSFs and overseas property
Q: Since we can now use super to purchase real estate, is this also true for property in the United States? Can you provide me with some guidance on how I could find out the process and correct entities to form to do this?
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Purchasing options is OK, and sometimes even CFDs
Q: Can a SMSF buy/sell call/put options? I understand that CFDs are not permitted because it breaches the charge over asset regulation. However, is that true that options are derivatives and in giving shares as a collateral (when writing options) to the Options Clearing House, it will treated differently (an exemption) as long as the SMSF has a derivatives risk management statement?
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Can I invest my super money in my own company?
Q: Can I set up a self managed super fund (SMSF) and invest the funds in a company of which I am the sole director. If yes, will the earnings of the super fund be tax free and would my drawings from the fund be tax free. I am 64 years old.
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HOW SUPER WORKS – Q and As
Super for beginners, part three: Why aren’t my super contributions tax-free?
Q: I checked my statement and I put an extra $10 per week into my super and each time an amount is put in, it has been taxed. Is this right? I thought that my contributions were tax-free?
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Making super contributions: cracking concessional cap means more tax
Q: I’m 53, put $24,700 of pre-tax contributions into my super account ($950/ftn) with my employer also putting in about $7,000 a year. So, the budget rules (halving the concessional contributions cap) mean I can still salary sacrifice this $950/ftn amount until July 2012, attracting only 15% tax, then every dollar contributed after that to my account over $25000 attracts %30 tax. Is that right, and if so I’ll just reduce my contributions so the combined amount stays under the $25,000.00?
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Non-concessional contributions: Re-contribution strategy still applies
Q: My wife will turn 60 later on this month and it has always been my intention to cash out her portion of our small self managed super fund (SMSF) and re-contribute it straight back in so as to ensure that when she and I pass away, our children are not hit by tax. Is that still a valid strategy after the latest budget changes and if so, am I correct in thinking that I only have one year in which to do it as the maximum bring forward amount will be reduced from the current $450,000 to some other number from July 1, 2010?
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Family tax benefits: do my tax-free super benefits count as income?
Q: Apart from a Public Sector PSS Super account, I have a superannuation account with AGEST to which contributions were made solely through salary sacrifice arrangements. I am about to retire from the Public Sector (age 60) and I am able to draw down a lump sum from AGEST which comes as a tax-free amount which, as confirmed by AGEST, is not required to be added to my tax return.
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Concessional contributions: SG and public servants
Q: I’m a member of the Military Superannuation & Benefits Scheme (MSBS), which is a hybrid defined contribution/defined benefit scheme. While I pay 5% of salary towards a ‘Member Benefit’, MSBS doesn’t have a 9% employer contribution, as my ‘Employer Benefit’ is based on years of service and Final Average Salary. I’m 56 yrs old and I am currently salary sacrificing $50,000 each year. I understand my concessional cap reduced to $50,000 for the 2009/10 financial year.
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Hi - I'm Trish Power, author of 
My wife and I have been running our own SMSF since 1996. Now fully retired, despite the downturn over the past two years, we are now reaping the benefits. Accounting, Auditing and Actuarial costs are over the top, amounting to some $4,000pa. Also, advice is out of the question, I recently emailed our Accountant questioning Centrelink’s assessment (we receive a small part Age Pension) of the income from my wife’s Complying Pension (pre August 2004) which was clearly wrong he emailed back his response saying he would have to refer it and we would have to have a full Financial Plan prepared – min. cost $500 and response to the query would take two weeks! I have found that you just have to be prepared to do the research and groundwork yourself. Luckily I have a son-in-law who is a qualified financial planner to help.
But we need all the help we can get, so I am looking forward to receiving the Super Guide Newsletter.
Hi
Thanks for your comments, and your support of SuperGuide. I am surprised that you have been advised to get a full financial plan for a single Centrelink query, although complying pensions are a complex area and perhaps your accountant was not familiar with these types of pensions. Hmm, this triggers a question of my own. If this same accountant is doing your fund’s accounting and reporting, for a SMSF that includes a complying pension, I would query why he wouldn’t know the answer, or at least be able to find out the answer for you. For background information, some financial advisers steer clear of anyone receiving Centrelink benefits (including Age Pension) because their ‘target’ client is a totally self-funded retiree. I personally think that taking such an approach is flawed, particularly since 80% of retirees receive a full or part Age Pension. On the flipside, depending on who you talk to at Centrelink, a query can be resolved nearly immediately or it can drag on for months, and perhaps the advisers feel they can’t charge for this time, or they believe clients won’t pay for it.
Regards
Trish