Category Archives: Wealth Generation

SMSFs – it pays to do your due diligence

SMSF Due DiligenceSelf Managed Super Funds (SMSFs) are very popular, and growing like wildfire. Ten years ago there was approximately $11 billion invested across 80,000 SMSFs in Australia. That grew to $439 billion across 478,000 SMSFs by 2012 which equated to about 30 per cent of the total funds Australians had put aside for their retirement. The growth rate for SMSFs continues to grow at a great rate with Australians directing about $500 million into SMSFs on a weekly basis.

There are a number of reasons why SMSFs are so popular – the control, transparency, flexibility and flat costs being the main reasons.

If you set up a SMSF, you are responsible for its investment decisions and complying with the strict rules regulated by the Australian Taxation Office. Not complying can be extremely costly. When you establish an SMSF you become a trustee of the fund and ultimate responsibility rests with the trustee.

So it pays to have good advice – and that’s what we’re here to provide – we guide and support our clients to ensure their fund is managed according to the rules and remains compliant. We carry out all the required administration and help with the investment decisions. We also consider very carefully whether or not a SMSF is indeed suitable because we do not set up our clients to fail.

Cost is another factor, and you don’t always get what you pay for when you engage the services of a professional provider.

We recently met with a potential client who had already established a SMSF with the help of their accountant at a cost of $10,000. This particular client had another 3 super funds that hadn’t been consolidated into their SMSF. Furthermore, their SMSF borrowed money to invest in property and a Bare Trust was established to enable this – yet they had enough money in their other super funds to buy the property outright and still have sufficient liquidity, and could have avoided the cost of establishing a Bare Trust and the subsequent borrowing and running costs.

It pays to do your due diligence before establishing a SMSF.

If you’d like to know more about SMSFs for wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

Frankly my dear, we give a damn!

TaxAustralian companies that pay dividends to their shareholders are taxed under what’s known as the ‘imputation’ system, because the tax is imputed (or assigned) to the shareholders in the form of franking credits attached to the dividend payments.

Investors can use franking credits to offset tax payable on all forms of income (not only dividends) and taxable net gains.

What some people don’t know is, you do not necessarily need to submit a tax return to receive a refund on your franking credits.

You can claim a refund on your franking credits dating as far back as 2001.

Even if you choose to reinvest your dividends, you can still claim a refund of any franking credits.

We recently had a client come in to see us, who is retired and receiving a tax-free income stream, and no longer submits tax returns. Part of their portfolio consists of shares, and they have been receiving franking credits for many years and had not sought a refund. We were able to get them a lovely refund of $16,000 dating back to 2002. Not bad for a client who walked in to see us with a Centrelink enquiry, and walked out with a $16,000 refund on its way to them!

If you’d like to know more about wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

What do cows and shares have in common?

Cows wander around paddocks, enjoying the grass. Cows have good times and bad times. Sometimes the grass is green, but other times the grass can’t be seen! Regardless of which paddock they are in, they are called in twice daily for milking, and bless their little cotton socks, they reliably produce milk albeit the volumes may fluctuate.

Wealth GenerationLikewise, shares can go up, down and sideways. They have good times and bad. Shares that pay dividends deliver yields twice a year regardless of how the shares have performed, however it should be noted that the dividend amount is directly linked to the company’s performance.

For this reason, we like to use the shares/cows analogy when we establish a share portfolio for our clients nearing or in retirement phase. A portfolio consisting of, let’s say, dividend paying bluechip shares selected from the ASX 200 means that year in year out, those shares will be producing regular and reliable payments. This can be a good strategy for retirees looking for a regular income stream.

A dividend is basically a distribution of profits paid by a company to its shareholders. The company determines whether to re-invest back into the business, or distribute some, all or none of the profit or surplus to its shareholders.

Shares that pay dividends pay out in two ways. Firstly there’s the dividend payments received twice a year as income, and secondly over time the shares capital value can also increase. A capital gain is where the difference between the original purchase price and the price you ultimately sell it for has increased. It’s important to note however, that the capital value can also decrease in value resulting in a capital loss.

The cream on top, pardon the pun, is the franking credits that often go hand in hand with dividend payments.

Franking credits are designed to stop company profits being taxed twice. The tax that companies pay on their profits can be passed on to their shareholders as a tax credit which is factored into the dividend payment. This can subsequently be used to offset the tax payable on the investor’s assessable income.

If you’d like to know more about wealth generation and income streams give us a call on 1300 887 528 or contact us via our webpage.

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