Xuereb SOA - Jan15

16 February 2015 Mr P. and Mrs P. Xuereb 10 Holloway Street BIRKDALE QLD 4159 Dear Paul and Pauline,

Re: Statement of Advice Thank you for choosing us as your financial advisers. By working together we can help set you on the path to a financially secure future. Enclosed is your Statement of Advice, which outlines strategies to assist you in achieving your lifestyle and financial objectives. Your Statement of Advice has been prepared based on the information provided by you during our meeting on November 21, 2014. Please take the time to read this document carefully to ensure that it reflects the information that we discussed in our meeting. Shortly, we will be in contact to organise a meeting to discuss our recommendations that will form the first steps towards helping you achieve peace of mind about your future. Yours sincerely,

Kristine Spiteri BA(Econ), DipFA/Snr Associate (FINSIA) Representative of Equipsuper Financial Planning Pty Ltd AFSL No 455010

Equipsuper Financial Planning Pty Ltd (ABN 84 124 491 078, AFSL 455010) is licensed to provide financial planning services to retail and wholesale clients. Equipsuper Financial Planning is owned on behalf of Equipsuper Pty Ltd (ABN 64 006 964 049, AFSL 246383) as the Trustee of the Equipsuper Superannuation Fund (ABN 33 813 823 017). Equipsuper Financial Planning Pty Ltd is responsible for any advisory services your financial planner provides.

Statement of Advice

Mr Paul & Mrs Pauline Xuereb

Date of advice

16 February 2015

Prepared by

Kristine Spiteri Representative of Equip Financial Planning Equipsuper Financial Planning Pty Ltd (ABN 84 124 491 078)

AFSL 455010

Ph 1800 065 753

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

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TABLE OF CONTENTS

Table of contents .................................................................................................................................. 4 Executive Summary ............................................................................................................................... 6 Lifestyle and Financial Objectives ......................................................................................................... 6 Strategy Recommendation Summary ................................................................................................... 7 Scope of Advice ..................................................................................................................................... 8 Warnings ............................................................................................................................................... 8 What we know about you ..................................................................................................................... 9 Personal Information ............................................................................................................................ 9 Personal Details .................................................................................................................................... 9 Estate Planning...................................................................................................................................... 9 Personal Superannuation .................................................................................................................... 10 Current Personal Risk Insurance ......................................................................................................... 11 Assets & Liabilities .............................................................................................................................. 11 Risk Profile........................................................................................................................................... 12 Recommendations - Superannuation ................................................................................................. 13 Superannuation Rollovers ................................................................................................................... 15 Non-Concessional Contributions ........................................................................................................ 18 Equip Transition to Retirement Pensions (TRPs) ................................................................................ 19 Investment Choice .............................................................................................................................. 21 Recommendations - Estate Planning .................................................................................................. 23 Wills ..................................................................................................................................................... 23 Powers of Attorney ............................................................................................................................. 23 Binding Death Nominations ................................................................................................................ 23 Estate Planning- General ..................................................................................................................... 23 Alternative and Possible Future Strategies ......................................................................................... 24 Alternative Strategies Considered ...................................................................................................... 24 Possible Future Strategies ................................................................................................................... 24 Current Asset Allocation ..................................................................................................................... 26 Proposed Asset Allocation .................................................................................................................. 27 Projected Key Results .......................................................................................................................... 28 Projected Long-term Outcome ........................................................................................................... 28 Replacement of Product Information ................................................................................................. 31 What you will pay and what we will receive ...................................................................................... 34 Disclaimers .......................................................................................................................................... 37 Where to from here? .......................................................................................................................... 39 Relevant Paperwork ............................................................................................................................ 39 Authority to Proceed........................................................................................................................... 40 Financial Modelling ............................................................................................................................. 42 Summary of Assumptions ................................................................................................................... 42 Appendix ............................................................................................................................................. 53 The Investment Asset Classes ............................................................................................................. 53 The Risk/Return Trade Off .................................................................................................................. 54 General Information ........................................................................................................................... 55 Superannuation - Introduction ........................................................................................................... 55 Superannuation Guarantee Contributions (SGC) ................................................................................ 55 Salary Sacrifice .................................................................................................................................... 55 Government Co-contribution ............................................................................................................. 56 Non-Concessional Contribution .......................................................................................................... 57


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Withdrawal & Re-contribution ........................................................................................................... 57 Taxation of Super Withdrawal ............................................................................................................ 58 Preservation ........................................................................................................................................ 58 Transition to Retirement ..................................................................................................................... 59 Salary Sacrifice .................................................................................................................................... 59 Transition to Retirement Pension (TRP) ............................................................................................. 59 Account Based Pension ....................................................................................................................... 60 Age Pension ......................................................................................................................................... 62 Centrelink Concession Cards ............................................................................................................... 63 Commonwealth Seniors Health Card .................................................................................................. 63 Pensioner Concession Card (PCC) ....................................................................................................... 64 Health Care Card ................................................................................................................................. 64 Estate Planning.................................................................................................................................... 65 Wills ..................................................................................................................................................... 65 Power of Attorney ............................................................................................................................... 65 Super Death Benefit Nominations ...................................................................................................... 66 Non-Binding Nominations ................................................................................................................... 66 Binding Nominations ........................................................................................................................... 66 Regular Review.................................................................................................................................... 66 Estate Planning – Super Death Benefits.............................................................................................. 67 Who gets your superannuation when you die? .................................................................................. 67 Few Exceptions ................................................................................................................................... 67 Definition of Dependant under Superannuation Law......................................................................... 67 Pension or Lump Sum? ....................................................................................................................... 68 Taxation of Super Death Benefits ....................................................................................................... 69


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EXECUTIVE SUMMARY

This Statement of Advice (SoA) is a record of the personal financial advice provided to you and includes information on the basis on which this advice is given, information about remuneration including fees, commissions, any other benefits and any interests, relationships or associations which might influence the making of the advice. If this advice includes a recommendation to you to acquire a particular financial product (other than securities) or an offer to issue or arrange the issue of a financial product to you, we will also provide you with a Product Disclosure Statement (PDS) containing information about the particular product to help you make an informed decision about that product. The purpose of this Executive Summary is to provide a snapshot of our advice to you. For more detailed information you should read the relevant section of this SoA.

Lifestyle and Financial Objectives

Paul and Pauline, you require a review of your existing superannuation investments to ensure they are appropriate to your needs and they are well positioned to meet your objectives.

You wish to review your financial situation with a focus on maximising your wealth prior to retirement and how best to structure your investments throughout your retirement.

You wish to build your wealth within the superannuation environment for retirement planning purposes.

Paul, you plan to retire at age 60 (21 October 2018).

Pauline, you plan to retire at age 67 (6 April 2017).

You wish to go on holiday in November 2015 at an estimated cost of $15,000. You also plan to maintain regular overseas and domestic holidays to visit family in the UK and in Melbourne.

You wish to undertake renovations on your home in November 2015 at a cost of approximately $5,000.

You wish to retain ongoing cash reserves of at least $50,000 in order to meet any unexpected large expenditures.

You wish to ensure you have appropriate estate planning strategies in place, incorporating Wills and Powers of Attorney, and beneficiary nominations for super and Account Based Pensions.

Please review the advice and make your own judgement or provide the additional details to me for further analysis.


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Strategy Recommendation Summary

Paul, we recommend you rollover the balance of your Colonial First State superannuation account to your existing Equip Personal accumulation account at your earliest convenience.

Paul, we recommend that you change the investment selection within your Equip Personal accumulation account prior to the recommended rollover so that future contributions are invested in the Cash option.

Pauline, we recommend that you rollover the balance of your Colonial First State Pension account into a newly established Equip Transition to Retirement Pension (TRP) at your earliest convenience.

Pauline, we recommend you salary sacrifice 100% of your income between now and 30 June 2015 (approximately $15,715), and salary sacrifice a total of $20,500 to super in the 2015-16 financial year. We further recommend you continue to make salary sacrifice contributions to super until retirement such that your income tax liabilities each financial year are minimised.

Paul, we recommend you make a personal deductible contribution to your Equip Personal accumulation account of $9,000 in the current financial year, and $16,000 in the 2015-16 financial year. We further recommend you continue to make personal deductible contributions to super until retirement such that your income tax liabilities each financial year are minimised.

Pauline, we recommend you make a non-concessional contribution of $1,000 p.a. into superannuation in the current financial year, and each subsequent financial year until retirement.

Paul, after rolling your Colonial First State account over to your existing Equip account, we recommend you transfer all but $5,000 of the balance of your Equip accumulation account into an Equip TRP. We recommend you draw the minimum pension as a fortnightly income stream to assist in funding your lifestyle.

Pauline, as recommended earlier, we recommend you transfer the balance of your Colonial First State pension into a newly established Equip TRP at your earliest convenience. We recommend you also draw the minimum pension as a fortnightly income stream to assist in funding your lifestyle in the lead up to retirement.

Paul and Pauline, we recommend you each make reversionary beneficiary nominations within your respective Equip TRPs.

Paul and Pauline, we recommend you invest your Equip TRPs with a time horizons (bucket) approach in line with your Balanced investor risk profile.

Paul and Pauline, we recommend that your pension payments are drawn from the Cash investment option. In addition, we recommend reviewing your investment strategy every year to ensure your asset allocation is in line with your risk profile.

Paul, after commencing your TRP we recommend that you alter the investment selection within your Equip Personal accumulation account so that the remaining balance and all future contributions are invested in the Balanced investment option.

Pauline, we recommend you review the investment choice within your QSuper account to ensure your accumulation assets are invested is in line with your Balanced investor risk profile.


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Paul and Pauline, we recommend that with the help of your solicitor you establish Wills to reflect your current financial situation at your earliest convenience, if you have not already done so.

Paul and Pauline, we recommend that with the assistance of your solicitor you establish Enduring Powers of Attorney at your earliest convenience, if you have not already done so.

Pauline, we recommend you put in place a binding death benefit nomination within your QSuper account, if you have not already done so.

Scope of Advice

This Statement of Advice is limited to:

Superannuation

Retirement Planning

Estate Planning

Social Security

In relation to the above areas we have not provided advice on:

The overall suitability of Pauline's QSuper fund as you did not request a review of this account and indicated you want to retain this account for receipt of ongoing employer and personal super contributions. We have made general strategy recommendations involving superannuation, and also included the balance of this account for financial modelling purposes. Please note however that as you did not want this fund reviewed, we cannot comment on its suitability for you.

The treatment of any unused leave entitlements you may have at retirement. For financial modelling purposes we have assumed all leave entitlements are utilised prior to retirement (rather than being received as a lump sum payout).

Your CBA shares, which you indicated you want to maintain. This holding has been incorporated for financial modelling purposes.

Your instructions to us have been to provide limited advice; the following areas will not be addressed:

Wealth Creation

Gearing

Self-Managed Superannuation

Personal Protection

Warnings

You did not provide a specific expenditure goal that you wish to achieve in retirement. As a result, for financial modelling purposes we have assumed you maintain living expenses in retirement of $50,000 p.a., which includes all travel expenditure (assumed to be $15,000 p.a.). As the financial modelling indicates you should be able to achieve this lifestyle comfortably, we have conducted further financial modelling to ascertain the highest level of spending you may be able to achieve throughout retirement. Please note that these financial modelling scenarios are based on a set of assumptions that may not accurately represent future investment performance, or unforeseeable changes to Government legislation; however they do provide a robust general guide.

Please see the Financial Modelling and Projected Key Results sections for more detail on your projected future financial situation, and the assumptions used in creating these projections.


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WHAT WE KNOW ABOUT YOU

The following information supplied by you summarises your current situation. If you believe that any of this information is incorrect or has been misinterpreted, you should let us know before proceeding with any recommendations we have made. Any detail not recorded indicates that the data has not been provided to us or is not relevant to the scope of the advice.

Personal Information

Personal Details

Paul Pauline

Date of Birth 21 October 1958 (Aged 56) 6 April 1950 (Aged 64)

Postal Address (if applicable)

10 HOLLOWAY STREET BIRKDALE, QLD, 4159

Home Phone 07 3207 1510

Home E-mail [email protected] Not Provided

Mobile 0421 331 709 0412 703 474

Preferred Contact 07 3207 1510

Dependants

Paul and Pauline, you have indicated that you do not have any financial dependants.

Employment

Paul Pauline

Employment Status: Self-Employed (Sole Proprietor) Part-time

Employer Name: By the Bay Mowing and Maintenance

Smart Service Queensland

Job Title: Gardener Customer Service Representative

Salary: $25,000 p.a. $40,394 p.a.

Expected Retirement Date: 21 October 2018 06 April 2017

Expected Retirement Age: 60 67

Estate Planning

Paul Pauline

Will Exists? Not Disclosed Not Disclosed

Power of Attorney? Not Disclosed Not Disclosed


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Personal Superannuation

Paul

Fund Name Colonial First State (Accumulation)

Balance $108,866 (as at 20 Jan 2015)

Nominated beneficiaries Pauline Xuereb (100%)

Paul

Fund Name Equip (Accumulation)

Balance $671,646 (as at 9 Feb 2015)

Nominated beneficiaries Pauline Xuereb (100%)

Current contribution levels

Employer Contributions N/A

Salary Sacrifice? Nil

Non-Concessional Contributions $1,000 p.a. (for Government Co-contribution)

Pauline

Fund Name Colonial First State (Transition to Retirement Pension)

Balance $198,948 (as at 15 Jan 2015)

Nominated beneficiaries None

Pauline

Fund Name QSuper

Balance $30,004 (as per Fact Find)

Nominated beneficiaries Not Disclosed

Current contribution levels

Employer Contributions Superannuation Guarantee (assumed to be 9.5% as per current legislation)

Salary Sacrifice? Nil

Non-Concessional contributions Nil


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Current Personal Risk Insurance

Paul and Pauline, you do not have any personal risk insurance policies.

Assets & Liabilities

Item Owner Value Linked to Debt?

Lifestyle Assets

Primary Residence Joint $490,000 No

Household Contents Joint $100,000 No

Motor Vehicles Paul

Pauline $18,000 $20,000

No

Business Assets Paul $15,000 No

Total Lifestyle Assets $643,000

Investment Assets

Superannuation Investments Paul $780,512 No

Superannuation/Pension Investments Pauline $228,952 No

Bank Account Joint $78,000 No

CBA Shares Pauline $30,000 No

Total Investment Assets $1,117,464

Total Liabilities* ($0*)

NET ASSETS $1,760,464

*your only financial liability is your credit card (current balance $15,300) which you stated you use for day-to-day living expenses and repay in full each month, so we have not included this in your net asset position.


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RISK PROFILE

Your Risk Profile

Your risk profile is a measure of how comfortable you are investing your funds across each of the asset classes. The combination of these asset classes provides us with an asset allocation that will be used to determine an appropriate investment strategy for you. There are various types of risk profiles, differentiated by their overall allocation to income and growth assets. During our meetings we have discussed your reasons for seeking advice, what sort of returns you are expecting, how you would like to manage your investments and what your short, medium and long term goals are, and how you feel about potential capital growth and investment security. These discussions have assisted us to measure how comfortable you are with different investment types and investments across different asset classes. From these discussions and based on the results of your Risk Profile Questionnaire, Paul’s risk profile was identified as Balanced, while Pauline your risk profile was identified as Conservative. However, after discussing your attitude to investment risk further, we agreed that you are most comfortable being assessed as a Balanced investor also moving forward.

Balanced (50% Income / 50% Growth)

Based on the income and growth percentages for your risk profile, we have assessed the most appropriate asset allocation for you as discussed later in this document. You are Balanced investors looking for some capital growth and income over the medium to long term. You require an investment strategy which will cope with the erosion that tax and inflation can cause. Calculated risks would be acceptable to you in order to achieve good returns. Generally an investment having a high security would be expected to have very low growth potential, and an investment having very high growth potential would have very low security of capital. Most investors regard risk as the potential to suffer a loss of capital during the term of the investment. Adopting the above investment risk profile means that you have understood and accepted the potential risk of negative returns across investments within your portfolio. If you feel the above profile does not reflect your attitude to investing, it is important we have further discussions before you implement our advice.

Refer to Appendices for:

The Investment Asset Classes

The Risk/Return Trade Off


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SUMMARY OF RECOMMENDATIONS – FLOWCHARTS

Recommendations for Paul - Now

Colonial First State Superannuation

Account

Existing Equip Accumulation

Account

Self-employed Income

(2) $9,000 Personal DeductibleContribution

(1) Rollover of Full Balance ($108,866*)

(3) Transfer all but $5,000 of balance($775,512*)

Equip Transition to Retirement Pension

(4) Minimum Pension Payments($1,193* per fortnight)

Bank Account

*approximate values


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Recommendations for Pauline – Now

Colonial First State Pension Account

New Equip Transition to

Retirement Pension

Employment Income

(2) Rollover of Full Balance ($198,948*)

(1) $15,715* Salary SacrificeContributions and $1,000

Non-ConcessionalContribution

Non-Equip Superannuation

Fund of your Choice

(3) Minimum Pension Payments($306* per fortnight)

Bank Account

*approximate values Paul and Pauline, the flowcharts above represent the recommendations that are to be implemented now. You will both continue to make personal deductible, salary sacrifice contributions (respectively) to your respective Equip accumulation accounts in future financial years. Please see the subsequent Recommendations sections for Superannuation and Estate Planning for more detailed discussion on the recommendations we have made for you both.


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RECOMMENDATIONS - SUPERANNUATION

Superannuation Rollovers Paul, we recommend you rollover the balance of your Colonial First State superannuation account to your existing Equip Personal accumulation account at your earliest convenience. Pauline, we recommend that you rollover the balance of your Colonial First State Pension account into a newly established Equip Transition to Retirement Pension at your earliest convenience (full Transition to Retirement Pension recommendations detailed separately). Benefits of our advice

Paul and Pauline, this will simplify administration as you will both hold the large majority of your superannuation savings with Equip (Pauline you wish to maintain your QSuper account).

Paul, consolidating your superannuation savings with Equip will facilitate the investment of these funds into an Equip Transition to Retirement Pension (recommendation detailed separately).

Paul, consolidating your superannuation accounts with Equip and then commencing an Equip Transition to Retirement Pension (recommendation detailed separately) should reduce your overall superannuation fees by approximately $710 p.a.

Risks and Implications

Pauline, rolling over the balance of your Colonial First State pension account to an Equip Transition to Retirement Pension may increase your overall fees by approximately $711 p.a. Please note however that the large majority of your Colonial First State pension funds are invested in the FirstRate Saver option ($170,679 of the total balance as at 20 Jan 2015), which is a cash option and has no investment management fee. Such a predominant investment in a cash-based option means your superannuation assets are not invested in line with your Balanced investor risk profile. If you were to align your investment options with your Balanced risk profile within your Colonial account, it is likely your total account fees would increase substantially. For instance, the FirstChoice Wholesale Balanced option has an investment fee of 1.01% p.a. If you were to be invested 100% in this option your total Colonial First State fees would be approximately $2,884 p.a., which is $1,695 p.a. more than what you are paying now.

By rolling over your Colonial First State accounts, you will no longer have access to the investment options or other fund-specific features offered through these accounts.

Paul and Pauline, please see the Replacement of Product Information section for more detail on the fees you are currently paying, and the fees you will be paying after implementing our recommendations.


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Salary Sacrifice and Personal Deductible Contributions

Pauline, we recommend you salary sacrifice 100% of your income between now and 30 June 2015 (approximately $15,715), and salary sacrifice a total of $20,500 to super in the 2015-16 financial year. We further recommend you continue to make salary sacrifice contributions to super until retirement such that your income tax liabilities each financial year are minimised. Paul, we recommend you make a personal deductible contribution to your Equip Personal accumulation account of $9,000 in the current financial year, and $16,000 in the 2015-16 financial year. We further recommend you continue to make personal deductible contributions to super until retirement such that your income tax liabilities each financial year are minimised. While the modelling indicates you will still have small tax liabilities leading up to retirement, increasing your personal deductible contributions by more than what we have recommended will increase your super contributions tax (15%) by more than the resultant reduction in your income tax. Paul and Pauline, we recommend reviewing this strategy every twelve months to ensure you remain on track to minimise your tax liabilities while not exceeding the concessional contribution cap (which may change). Please see the Financial Modelling section for more information on how much you may need to salary sacrifice to super to achieve this. Benefits of this advice

Paul, as you are self-employed you are able to make personal deductible contributions to super, which will be fully tax deductible to you. They are essentially the same as salary sacrifice contributions.

Whilst these personal deductible and salary sacrifice contributions will incur contributions tax of 15%, this is less than your respective marginal tax rates and should therefore provide immediate tax savings. Paul, while your current taxable income is quite low (approximately $25,000 p.a.), this will increase once you commence the recommended Transition to Retirement Pension (recommendation detailed separately), resulting in a greater need for salary sacrifice contributions from a tax minimisation perspective.

Additional contributions will accelerate the accumulation of your superannuation assets which will assist to meet the financial goal that you booth have to boost your retirement savings and thereby assist you to meet your income goals in retirement.

Paul and Pauline, we estimate that these personal deductible and salary sacrifice contributions should help to ensure that you generate a total overall combined tax saving of approximately $2,389 for the 2014-15 financial year as illustrated by the below tables:

Paul

No Personal Deductible

Contributions Recommended Personal Deductible Contributions

Income Tax (Estimated) $2,394 $571

Contributions Tax $0 $1,350

Total Tax $2,394 $1,921

Tax Benefit (Estimated) $473


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Pauline

No Salary Sacrifice

Contributions Recommended Salary Sacrifice Contributions

Income Tax (Estimated) $5,524 $1,251

Contributions Tax $0 $2,357

Total Tax $5,524 $3,608

Tax Benefit (Estimated) $1,916

We estimate that salary sacrificing at this level should also ensure that you remain below the $35,000 p.a. concessional contribution limit for the current and following financial years. We estimate that your concessional contributions for the 2014-15 and 2015-16 financial years will be as follows:

Paul

Type of contribution

Amount of Contribution

(2014-15)


(2015-16)

Employer Superannuation Guarantee payment N/A N/A

Personal deductible contributions already this financial year $0 N/A

Recommended personal deductible contributions $9,000 $16,000

Total Concessional Contributions for 2014-15 $9,000 $16,000

Pauline

Type of contribution Amount of

Contribution (2014-15)



(2015-16)

Employer Superannuation Guarantee payment $3,837 $3,953

Salary sacrifice contributions already this financial year $0 $0

Recommended salary sacrifice contributions $15,715 $20,500

Total Concessional Contributions for 2014-15 $19,552 $24,453


Concessional contribution limits apply. Currently the concessional contribution limit is $35,000 for individuals aged 49 or over as of the 30th June 2014. Please note that the concessional contribution limit consists of employer Superannuation Guarantee (SG), salary sacrifice and personal deductible contributions. Contributions exceeding this limit will be taxed at your maximum marginal tax rate plus an interest charge.

Please monitor your contributions regularly and contact your financial adviser immediately if you believe you may breach your concessional contributions cap.

Contributions are generally preserved until you meet a condition of release (i.e. retirement or reaching age 65).


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Contributions tax of 15% applies to all salary sacrifice and personal deductible contributions to superannuation.

Your employer may be required to pay superannuation guarantee on any bonuses received and this would be included as part of your concessional contribution cap. You did not advise of any bonuses you receive.

These contributions will reduce your disposable income and may affect your ability to meet your required living expenses. This risk is mitigated by the recommended Transition to Retirement Pension income which is providing you with surplus cash flow.

Pauline, your employer may base your Superannuation Guarantee (SG) entitlement on your adjusted salary (salary after salary sacrificing) rather than your gross salary. This will lower the amount of SG your employer pays to you. Please check with your employer before commencing salary sacrifice contributions.

Non-Concessional Contributions

Pauline, we recommend you make a non-concessional contribution of $1,000 p.a. into superannuation in the current financial year, and each subsequent financial year until retirement. These contributions can be funded from current cashflow (earned income or pension income) or from existing cash reserves. Benefits of this advice

By making these non-concessional contributions you may be eligible for the Government Co-Contribution, where the government matches up to $500 of your superannuation contribution. Please see the Financial Modelling section for more detail on how much of the Government co-contribution you may be eligible for.

The non-concessional contributions will increase your superannuation retirement savings.

Non-concessional contributions are tax-free.

Superannuation is a concessionally taxed investment vehicle.

Upon reaching a condition of release (retirement or turning 65 years of age), your superannuation funds are accessible at any time upon request and are tax-free.


Contributions are preserved until a condition of release is satisfied, e.g. retirement or attaining 65 years of age (whichever occurs earlier).

Non-concessional contribution caps apply. Currently the non-concessional limit is $180,000. Any personal post-tax contributions must not exceed the Non-Concessional Contribution limit; otherwise the excessive amount is taxed at the top marginal rate of 49% (including the Medicare Levy and Temporary Budget Repair Levy).

These funds will be exposed to investment risk (in line with the inherent risk of your chosen superannuation investments).

These contributions will reduce your disposable income and may affect your ability to meet your required living expenses. This risk is mitigated by the recommended Transition to Retirement Pension income which is providing you with surplus cash flow.

Legislation may change such that you are no longer eligible to receive a Government co-contribution.


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Individuals aged 65 and over can only make non-concessional contributions during a financial year provided the work test is satisfied. The work test requires you to be gainfully employed for at least 40 hours within a consecutive 30-day period within the financial year of the contribution. Pauline, as we only recommend you continue to make these non-concessional contributions while you are working, you will meet the work test.

Loss of the Australian government bank guarantee

You will lose immediate access to these funds.

Equip Transition to Retirement Pensions (TRPs)

Paul, after rolling your Colonial First State account over to your existing Equip account, we recommend you transfer all but $5,000 of the balance of your Equip accumulation account into an Equip Transition to Retirement Pension (TRP). We recommend you draw the minimum pension as a fortnightly income stream to assist in funding your lifestyle. Based on an estimated opening account balance of $775,512, your minimum pension payments will be approximately $1,193 per fortnight (approximately $31,020 p.a.).

Pauline, as recommended earlier, we recommend you transfer the balance of your Colonial First State pension into a newly established Equip Transition to Retirement Pension at your earliest convenience. We recommend you also draw the minimum pension (4% of the account balance) as a fortnightly income stream to assist in funding your lifestyle in the lead up to retirement. Based on an estimated opening account balance of $198,948 your minimum pension payments will be approximately $306 per fortnight (approximately $7,958 p.a.).This applies for the remainder of this financial year. From 1 July 2015 you will be required to draw an increased minimum of 5% of your account balance as you will be 65 years of age as at 1 July 2015. Based on a projected account balance of $201,797, your minimum pension payments will be approximately $388 per fortnight (approximately $10,090 p.a.).

Paul and Pauline, we recommend you each make reversionary beneficiary nominations within your respective Equip TRPs.

Benefits of this Advice

Transition to Retirement Pensions are a flexible means of providing retirement income.

Pauline, as you are over age 60, pension payments are tax-free.

Paul, your pension payments prior to age 60 are tax-efficient. Based on your current tax components, approximately 8% of your pension payments will be tax-free and 92% will be taxable. The taxable component of your pension payments attracts a 15% tax rebate. Once you are over age 60, pension payments are tax-free.

The Transition to Retirement Pensions payments will assist you to meet your income needs in the lead up to retirement, as you make salary sacrifice and personal deductible contributions to super which will reduce your take-home pay considerably.

Transition to Retirement Pensions can be rolled back to accumulation phase upon request.

Paul, the administration fee is capped at an account balance of $450,000. Therefore the overall percentage fees reduce as the account balance increases .

Paul, investment earnings within a Transition to Retirement Pensions are tax-free. The superannuation tax saving is estimated to be $8,934 assuming a 7.68% p.a. return for a Balanced investor, as illustrated in the following table:


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Superannuation Income Tax Comparison p.a. Accumulation Pension

Balance $775,512 $775,512

Investment Earnings (7.68%) $59,559 $59,559

Tax on Investment Earnings (15%) $8,934 $0

Tax Saving - $8,934

You can choose the frequency of your pension payments (e.g. monthly, quarterly, half yearly or annually).

Pauline, the funds we recommend you rollover from Colonial First State are already held in the earnings tax-free pension environment.

Paul, maintaining a small balance in your Equip accumulation account will facilitate the recommended personal deductible contributions.

For an analysis of the fees and charges please refer to the Disclosures section of this Statement of Advice.

Pauline, while lump sums cannot be drawn from a Transition to Retirement Pension, once you turn 65 your TRP will automatically become an Account Based Pension. At this point 100% of your pension and accumulation funds will become unrestricted ‘non-preserved’, and there will be no restrictions on how much you can draw from your pension (and accumulation account), and all withdrawals will be tax-free.

A reversionary beneficiary nomination allows you to nominate a dependant (such as your spouse) to receive the income stream upon your death. The reversionary pension beneficiary will continue to receive the income stream for the duration of the pension or have the option to cash out the income stream account as a lump sum at their discretion, as long as they are your spouse at the time of death.


Paul, administration fees are higher in an Equip pension than in an Equip accumulation account. This will result in a $597 increase in administration fees per year. Pauline, please see the Product Replacement section for information on the fees you are currently paying and what you will pay within your Equip TRP.

Drawing income which exceeds the earnings of your fund will increase the risk of you exhausting your capital prematurely.

You must take the minimum pension payment each financial year. Based on your age your minimum pension payments will be calculated on 4% of the 1 July account balance (pro-rated in the year of commencement). Pauline, from 1 July 2015 you will be required to draw at least 5% of the 1 July account balance, as you will be age 65 at 1 July 2015.

Paul and Pauline, you cannot draw more than 10% of the 1 July account balance from your Transition to Retirement Pension as regular pension payments. Pauline this 10% maximum income payment will no longer exist for you at your 65th birthday, when your Transition to Retirement Pension converts to an Account Based Pension.

You are unable to withdraw lump sums from your Transition to Retirement Pensions. You can take up to 10% of the 1 July balance as a single annual payment however.

The balance of your pensions may reduce to a level which is insufficient to meet your income needs later in life, depending upon the performance of the underlying investments and the level of income and capital you draw over time.


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Paul, pension payments from your Transition to Retirement Pension are taxable at your marginal tax rate (less a 15% tax rebate) while you are under 60 years of age.

Investment Choice

Paul, we recommend that you change the investment selection within your Equip Personal accumulation account prior to the recommended rollover so that future contributions are invested in the Cash option. Paul and Pauline, we recommend you invest your Equip TRPs with a time horizons (bucket) approach. This involves investing your short to medium term income needs to cash and other lower risk investments, with the remainder of funds invested in options that have higher growth asset exposure. This strategy ultimately creates a portfolio in line with your Balanced investor risk profile, as shown in the following tables: Paul

Investment Choice Weighting Amount (approx.) Investment Timeframe (approx.)

Cash 4% $35,000 1-2 years’ income needs

Conservative 48% $370,256 Remainder of funds

Balanced Growth 48% $370,256

TOTAL 100% $775,512

Pauline

Investment Choice Weighting Amount (approx.) Investment Timeframe (approx.)

Cash 5% $10,000 1-2 years’ income needs

Conservative 47.5% $94,474 Remainder of funds

Balanced Growth 47.5% $94,474

TOTAL 100% $198,948

We recommend that your pension payments are drawn from the Cash investment option. In addition, we recommend reviewing your investment strategy every year to ensure your asset allocation is in line with your risk profile. Paul, after commencing your TRP we recommend that you alter the investment selection within your Equip Personal accumulation account so that the remaining balance and all future contributions are invested in the Balanced investment option. Pauline, we recommend you review the investment choice within your QSuper account to ensure your accumulation assets are invested is in line with your Balanced investor risk profile. You did not wish for us to review this account so we cannot make further comment on its suitability for you. You intend on maintaining this account as your current employer (Queensland government) contributes to this superannuation fund.


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Benefits of this advice

Paul, changing your future contributions investment election to Cash prior to the recommended rollover will mean no buy/sell costs are incurred as part of the rollover.

Investing your pension portfolios with time horizons (bucket) strategies and drawing your pension payments from the Cash option will allow the market-linked options to move in line with investment fluctuations without impacting your immediate cashflow needs. You will therefore not need to sell down on growth assets prior to their recommended investment timeframes in order to fund your pension payments.

Pension and superannuation assets will be invested within the parameters of your Balanced investor risk profile.

Assist to increase the value of your superannuation assets over time by increasing exposure to growth assets and also assist to negate the impact of inflation.

The income and growth expected from investing in this portfolio will build your superannuation and assist you to meet and maintain your income needs in retirement.

A regular review of your risk profile will assist to ensure the appropriate diversification across all appropriate asset classes, and to ensure sufficient liquidity and capital growth for your financial circumstances.


As you will be drawing your pension payments from the cash investment option, over time the proportion of your pension held in growth asset such as shares and property is likely to increase and potentially fall outside of your risk profile. We therefore recommend you review your asset allocation on an annual basis and if necessary rebalance your portfolio to ensure that this does not occur.

Increasing exposure to growth assets will expose your portfolio to increased risk and therefore higher short-term market volatility.

Failure of the investment options to perform as expected may result in your desired level of income in retirement not being met. Diversification across asset classes can help to temper some of the fluctuations.

Paul, a small buy/sell cost of approximately $17 will be incurred when you make the recommended investment switch within your Equip accumulation account (after commencing your TRP). The switching fee will be deducted from your superannuation benefits.


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RECOMMENDATIONS - ESTATE PLANNING

Wills

Paul and Pauline, you did not disclose whether you have Wills in place or not. We recommend that with the help of your solicitor you establish a Will to reflect your current financial situation at your earliest convenience, if you have not already done so.

Powers of Attorney

Paul and Pauline, you did not disclose whether you have Enduring Powers of Attorney in place. We recommend that with the assistance of your solicitor you establish Enduring Powers of Attorney at your earliest convenience, if you have not already done so.

Binding Death Nominations

Pauline, we recommend you put in place a binding death benefit nomination within your QSuper account, if you have not already done so.

Estate Planning- General

Although considerable emphasis is placed on wealth creation and protection, a third vital aspect of your financial strategy is how your wealth will be distributed after your death. Estate planning is the planning and documentation of your wishes for the distribution of your wealth following death, including assets you own personally as well as assets you control or the control of your assets while you are still living but unable to exercise your own decisions. Estate planning is a specialist area and it is therefore important you obtain professional legal advice in relation to all areas of your estate plan. However we outline below some of the issues you should consider in designing your estate plan. Regardless of whether you have a current Will and Power of Attorney in place it is worthwhile reviewing these on a regular basis to ensure that they continue to fulfil your wishes. . Further information on Estate Planning can be found in the attached appendices


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ALTERNATIVE AND POSSIBLE FUTURE STRATEGIES

Alternative Strategies Considered

Other strategies we have considered when assessing your goals and objectives:

Maintaining your superannuation monies in accumulation phase - Paul

This strategy was not recommended for the following reasons:

Earnings on funds held in accumulation phase are taxed at up to 15%. Earnings on funds held in pension phase are tax-free.

Accumulation accounts do not provide a regular income to meet your ongoing needs as your take home pay reduces as a result of the recommended personal deductible and salary sacrifice contributions for yourself and Pauline (respectively). The TRP income will help you meet your ongoing income needs in the lead up to retirement.

Cash out Colonial First State Pension at age 65 - Pauline

Pauline, at your 65th birthday on 6 April 2015, you will be eligible for a full cash out of your pension account balance. However, it is considered appropriate to attend to a pension rollover prior to your birthday (i.e. as soon as possible) to ensure you are invested in accordance with your Balanced investor profile and not out of markets as you are now with your current cash investment option within your Colonial First State pension account. Cashing out would also mean that the funds would have to be contributed back into superannuation before a Transition to Retirement Pension could commence. This involves additional administration and the funds contributed would be a non-concessional contribution to superannuation using the Non-concessional capping limit “bring forward rule”. Also, the adding of these cashed out funds to your younger spouse, Paul’s superannuation was considered and is not suitable. At your 65th birthday Pauline your funds will become unrestricted non-preserved status, however while Paul continues to work, his super and pension accounts will be preserved funds with limited cashing ability of a maximum of 10% of the account balance for Paul’s Transition to Retirement Pension.

Possible Future Strategies

Re-contribution

Paul, you may wish to consider implementing a re-contribution strategy in future. This involves withdrawing funds from super and directing them back into super via a non-concessional contribution. This increases the tax-free component of your super savings, reducing any potential tax liability payable by non-tax dependants (e.g. adult children) upon your death. Tax dependants such as a spouse pay no tax on superannuation death benefits, but adult children currently pay 17% tax (including Medicare Levy) on such inheritances.


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Commonwealth Seniors Health Card

Paul and Pauline, our financial modelling indicates that you may not be eligible for any Age Pension entitlements due to your significant assets. However, you may still be eligible for the Commonwealth Seniors Health Card. Centrelink will be able to assess your eligibility for this card as well. Please see the Appendix section for more information.

Make additional Non Concessional Contributions to Superannuation –Paul

As shown in our financial modelling, your bank account balance will increase due to the personal income tax savings (from the salary sacrificing and personal deductible contributions to superannuation) and income from the pensions. At future reviews, you may consider to make additional non-concessional contributions to your superannuation from your surplus savings in your bank account.

Consolidate TRP and Accumulation Accounts into an Account Based Pension - Paul

Paul, at retirement you will no longer have need for an accumulation account. You may therefore wish to consider consolidating your accumulation and TRP accounts into a new Account Based Pension. An Account Based Pension has the same benefits and risks as the recommended TRP, with the additional benefit of unlimited withdrawals at any time.

Cash out QSuper accumulation account after age 65 – Pauline

Pauline, once you reach age 65 you will have met a condition of release, meaning you can access 100% of your superannuation savings, tax-free. You may wish to consider cashing out some or all of your QSuper monies to fund your lifestyle goals and needs if required. Please note however that whilst you are working you should maintain a balance in this account to facilitate your ongoing employer and personal superannuation contributions.

Cash out Super and Pension and add to Paul’s super at Paul’s retirement –Pauline

Pauline, this may be advantageous to reduce administration costs for your combined retirement savings. These and any other strategies that may become appropriate can be reviewed in future.


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CURRENT ASSET ALLOCATION

Asset allocation is the term used to refer to how your current investments are distributed among various asset classes (e.g. Australian equities, property, fixed interest and cash). The following chart illustrates the allocation of your current investment assets across each of the major asset classes. Please note, this chart does not include personal assets such as your family home.

Current Overall Asset Allocation

Overall, you have a combined asset allocation of approximately 43% growth assets and 57% income generating assets which is within the parameters of a Balanced investor risk profile. Please note, while your overall asset allocation is in line with your Balanced investor risk profile, you are currently overweighted to domestic cash, due to your considerable cash reserves outside of super (of which you wish to maintain approximately $50,000), and significant cash investments in Pauline’s Colonial First State Pension. Please also note that the above graph does not include Pauline’s QSuper investments, as details on how this account is invested were not provided.


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PROPOSED ASSET ALLOCATION

Paul and Pauline, we believe it is prudent to preserve your accumulated assets, however it is important to achieve a steady real return (in excess of inflation) to achieve your medium to long term goals and to ensure the sustainability of your accumulated assets. We recommend you increase your current exposure to growth assets and further recommend that you regularly review your investment asset allocation now and on an ongoing basis to ensure appropriate diversification across all appropriate asset classes, and to ensure sufficient liquidity and capital growth under your circumstances. The following chart illustrates the allocation of our recommended investment portfolio across each of the major asset classes:

Proposed Overall Asset Allocation

By implementing the recommendations in this Statement of Advice, we estimate that your overall asset allocation will alter to 46% exposure to growth assets and 54% exposure to income generating assets which is within the parameters of your Balanced investor risk profile. We have assumed $20,000 of existing cash reserves has been used to fund your planned travel in 2015 ($15,000) as well as your home renovations ($5,000). This benchmark asset allocation is an indicative allocation only. Over time, your portfolio’s actual asset allocation will fluctuate depending on economic conditions, anticipated market movements and the performance of the investments in your profile. If you are not prepared to accept the associated investment risk of our recommended investment portfolio (asset allocation), it would be essential that you review your stated goals and objectives and specified time frames.


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PROJECTED KEY RESULTS

Projected Long-term Outcome

Paul & Pauline, as discussed previously, you did not provide a specific expenditure goal that you wish to achieve in retirement. As a result, for the primary financial modelling we have assumed you maintain living expenses in retirement of $50,000 p.a. This is based on your current living expenses (approximately $35,000 p.a., being Pauline’s after-tax income which you stated you are currently living off), plus allowance of $15,000 p.a. for travel. The financial modelling indicates that you may accrue sufficient capital to meet this level of expenditure throughout retirement, and also your various capital expenditure goals (home renovations and ongoing travel now and in retirement). Please note: A number of further assumptions have been used in the preparation of these calculations, which may not accurately reflect your retirement position. The projection provides a good general overview but careful review will be required over time to ensure that you remain in a position to fund your lifestyle over the period of your life time. In the preparation of the financial projections we have assumed you will implement all the recommendations and assumptions outlined in this Statement of Advice. Please refer to the Financial Modelling section for a list of the assumptions used in the financial projections.


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The above graph illustrates what sources will provide the funding for your desired retirement income. The following graph illustrates the present value of your retirement assets over time which allows you to fund your desired retirement lifestyle.

Detailed modelling projections in relation to the above can be found in the Financial Modelling section of this Statement of Advice. Please also refer to the Disclaimers section for the limitations of financial projections.

Potential for More Comfortable Retirement Lifestyle - $90,000 p.a. Retirement Expenditure

Paul & Pauline, the primary financial modelling for which we have assumed you maintain living expenses of $50,000 p.a. in retirement (including travel expenditure) indicates that you may achieve this level of expenditure comfortably. As a result we have conducted further financial modelling to analyse the highest level of spending your assets may allow you to maintain in retirement. Our projections indicate you may have the capacity to fully fund an expenditure level of $90,000 p.a. throughout retirement. For this alternative scenario, all assumptions remain the same (as the primary modelling), except for the higher level of spending in retirement. Again, it is important to note that these assumptions may not accurately reflect your retirement position and therefore should be used as a guide only.


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The above graph illustrates what sources will provide the funding for this higher level of retirement spending. The following graph illustrates the present value of your retirement assets over time which allows you to fund this more comfortable retirement lifestyle.


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REPLACEMENT OF PRODUCT INFORMATION

We have considered and recommended the replacement of your existing investments in the following products:

Paul – Rollover your Colonial First State accumulation account to Equip and commence an Equip Transition to Retirement Pension

CURRENT RECOMMENDED

Colonial First State

Superannuation

Equip Personal

Superannuation

Equip Personal

Superannuation

Equip Transition to

Retirement Pension

Account Balance $108,866 $671,645 $5,000 $775,512

Exit Fees (if applicable) Nil N/A N/A N/A

Investment Option (as per Risk Profile) CFS Cash Equip MySuper Balanced Mixed (overall

Balanced)

Asset Allocation (Growth / Defensive) 0 / 100 (approx.) 60 / 40 (approx.) 50 / 50 (approx.) 48 / 52 (approx.)

Sector and Pre-mixed Options Yes Yes Yes Yes

Current Insurance Nil Nil Nil N/A

Ongoing Fees

Flat Administration Fees Nil $78 $78 Nil

Asset-based Administration Fees Nil $1,437 (0.21%) $14 (0.28%) $2,196 (0.28%)

Investment Fees $1,241 (1.14%) $4,366 (0.65%) $29 (0.57%) $4,094 (0.53%)

Total Ongoing Fees p.a. $1,241 (1.14%) $5,881 (0.88%) $121 (2.41%) $6,289 (0.81%)

Paul, you also pay a 4% contribution fee on all contributions into your Colonial First State account.

Pauline - Rollover your Colonial First State pension to an Equip Transition to Retirement Pension

CURRENT RECOMMENDED

Colonial First State Pension Equip Transition to Retirement Pension

Account Balance $198,948 $198,948

Exit Fees (if applicable) Nil Nil

Investment Option (as per Risk Profile) Mixed Mixed (overall Balanced)

Asset Allocation (Growth / Defensive) 14 / 86 (approx.) 48 / 52 (approx.)

Sector and Pre-mixed Options Yes Yes

Current Insurance N/A N/A

Ongoing Fees

Flat Administration Fees Nil Nil

Asset-based Administration Fees Nil $855 (0.43%)

Investment Fees $318 (0.16%) $1,054 (0.53%)

Adviser Fee $875 (0.44%) Nil

Total Ongoing Fees p.a. $1,193 (0.60%) $1909 (0.96)


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Pauline, please note that while your superannuation fees will increase by approximately $711 p.a. by rolling over to an Equip TRP, the large majority of your Colonial First State funds are invested in the FirstRate Saver option ($170,679 of the total balance as at 20 Jan 2015), which is a cash option and has no investment management fee. Such a heavy investment in a cash option means you are not invested in line with your Balanced investor risk profile. If you were to align your investment options with your Balanced risk profile within your Colonial account, it is likely your total account fees would increase substantially. For instance, the FirstChoice Wholesale Balanced option has an investment fee of 1.01% p.a. If you were to be invested 100% in this option your total Colonial First State fees would be approximately $2,884 p.a. Please see the earlier Superannuation Rollovers section for further information on the associated benefits and risks involved with these recommended transactions.


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ONGOING REVIEW SERVICE

A financial plan requires regular review in order to ensure that it continues to meet your needs. The review process should address:

your changing needs and objectives

your income and debt levels

your family situation and health.

your taxation position

the economic environment

investment sector performance

social security issues

investments available

taxation position of investments

fund manager and investment performance All these factors are subject to change and these changes may have significant impact on the suitability of your portfolio. Equipsuper Financial Planning Pty Ltd recommends ongoing reporting and advisory services as this will enable you to review your financial strategy regularly and to alter your portfolio as required. Recommended Review Service

We recommend that you sign on to our annual review service which entitles you to:

An annual meeting with your Financial Planner

Your own personalised review document each year outlining your financial plans. This document may contain for example updates to recommendations such as salary sacrifice amounts, investment choice, pension rebalancing, optimising Centrelink entitlements, and any other relevant recommendations.

Discussions about various financial issues

Access to your financial planner on an ad hoc basis

The cost of the annual review service is $550 p.a. (inclusive of GST). Remember that any costs associated with your annual review fee can be deducted from your Equip account where the advice provided relates mainly to your account with Equip. Please note, if you do not participate in an annual review, previously implemented strategies may not continue to be appropriate to your changing needs and circumstances. Time Horizons (‘Bucket’) Approach

A time horizons (‘bucket’) approach can be adopted with respect to your superannuation/pension assets. This is a dynamic strategy involving investment in multiple options and is recommended to ensure the risk of crystallising any short-term market losses is minimised as you draw a regular retirement income, while maintaining an overall portfolio that reflects your Balanced risk profile. By the very nature of this strategy, your growth asset allocation may increase beyond an acceptable level for a Balanced investor as you draw your income from the less risky options. It therefore could become important for you to seek an annual review of your portfolio to ensure your portfolio aligns to your risk profile.


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DISCLOSURES

It is important that you understand the costs payable by you for the financial services we have provided. This section outlines the costs payable by you and will also detail the fees and benefits that Equipsuper Financial Planning Pty Ltd are entitled to receive for providing these services. In addition to the fees paid to us, the investment and/or insurance products we recommend to you may also charge fees. Please refer to the appropriate Product Disclosure Statement (PDS) for further information.

What you will pay and what we will receive

Representative Remuneration

Your financial planner is an employee representative of Equip Financial Planning and is paid by way of salary.

Plan Preparation Fee

Fee Description Total Fee Amount

Plan Preparation Fee $1,100

Total $1,100

Ongoing Review Fee

Fee Description Total Fee Amount

Ongoing Review Fee* $550 p.a.

*This entitles you to an annual review appointment and an updated advice document issued following your appointment as well as ad-hoc access to your financial planner throughout the year. Should you choose not to sign up to the recommended review service, additional financial planning services including review appointments and updated advice will be charged at $143 per hour.

Investment Fees

Paul’s Equip Personal Accumulation Account

Investment Amount

Invested

Average

Administration/

Trustee Fee (pa)

Investment

management fees Total (pa)

$ % $ % $ % $

Flat Admin Fee $78 $78

Balanced $5,000 0.20% $10 0.57% $29 0.77% $39

Special Charge Balance 0.08% $4 0.00% $0 0.08% $4

TOTAL $5,000 1.84% $92 0.57% $29 2.41% $121


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Paul’s Equip Transition to Retirement Pension

Investment Amount

Invested

Average

Administration/

Trustee Fee (pa)

Investment


$ % $ % $ % $

Cash $35,000 0.20% $71 0.06% $21 0.26% $92

Conservative $370,256 0.20% $752 0.45% $1,666 0.65% $2,418

Balanced Growth $370,256 0.20% $752 0.65% $2,407 0.85% $3,159


TOTAL $775,512 0.28% $2,195 0.53% $4,094 0.81% $6,289

Pauline’s Equip Transition to Retirement Pension

Investment Amount

Invested

Average

Administration/

Trustee Fee (pa)

Investment


$ % $ % $ % $

Cash $10,000 0.35% $35 0.06% $6 0.41% $41

Conservative $94,474 0.35% $331 0.45% $425 0.80% $756

Balanced Growth $94,474 0.35% $331 0.65% $614 1.00% $945


TOTAL $198,948 0.43% $855 0.53% $1,045 0.96% $1,901

Fee Notes

Equip Accumulation

Paul, the investment amount is based on the $5,000 we recommend you maintain in your Equip accumulation account when you commence an Equip Transition to Retirement Pension.

All fees are paid to Equipsuper Pty Ltd as trustee for the Equip Superannuation Fund.

Investment management fee (IMF) is calculated at the percentage rate shown based on the investment amount shown. The dollar amount of the IMF will change depending on movements in your account. The IMF is deducted monthly from fund assets before investment returns are calculated.

Administration fee: $1.50 per week plus 0.20% per annum up to a maximum account balance of $450,000, plus 0.08% per annum*. The 0.20% is calculated and deducted from your account effective on the last day of every month. The 0.08% is deducted from the underlying asset value and reflected in the daily unit prices applied to your account.

The actual dollar amount of the Administration fee will change depending on movements in your account.

Buy and Sell costs reflect the brokerage and transaction cost incurred. It is charged through a differential between the buy and sell price of units.

*The administration fee includes a 0.08% per annum provision to build Equip’s reserves, to cover operational risks and expenses incurred in running the Fund.


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Equip Pensions

Paul, the investment amount is based on the combined balances of your Equip accumulation account and your Colonial First State accumulation account at 9 February and 15 January 2015 (respectively), less the $5,000 we recommend you maintain in your Equip accumulation account.

Pauline, the investment amount is based on the balance of your Colonial First State pension account as at 15 January 2015.

All fees are paid to Equipsuper Pty Ltd as trustee for the Equip Superannuation Fund.

Investment management fee (IMF) ranges from 0.06% to 0.75% p.a. and is calculated at the percentage rate shown based on the investment amount shown. The dollar amount of the IMF will change depending on movements in your account. The IMF is deducted from the gross investment return and included in the daily unit price calculation.

Administration Fee: 0.35% per annum up to a maximum account balance of $450,000, plus 0.08% per annum*. The 0.35% is calculated and deducted from your account effective on the last day of every month. The 0.08% is deducted from the underlying asset value and reflected in the daily unit prices applied to your account.

The actual dollar amount of the Administration fee will change depending on movements in your account.

Buy and Sell costs reflect the brokerage and transaction cost incurred. It is charged through a differential between the buy and sell price of units.

*The administration fee includes a 0.08% per annum provision to build Equip’s reserves, to cover operational risks and expenses incurred in running the Fund.


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DISCLAIMERS

Appropriateness and Suitability

Generally, section 961B of the Corporations Act 2001 (Cth) requires that we must act in your best interests. Our recommendations to you must have a reasonable basis and be appropriate for you considering your relevant personal circumstances and our reasonable inquiries. In preparing this advice we have relied on the information you have supplied being accurate and complete and if this is not the case, you should contact us or make your own assessment of the appropriateness of the advice before acting upon our recommendations. We ask you to read the recommendations and supplementary information provided to you including the Product Disclosure Statements and ensure you fully understand the contents. Where you have any queries, please consult your adviser before proceeding. This advice has been prepared solely for your use and should not be used as a guide by any other person, to whom Equipsuper Financial Planning Pty Ltd or any of its Representatives do not accept any liability.

Time Limitation

The recommendations in this advice are based on your current personal circumstances, lifestyle and financial goals, current economic, investment and legislative conditions. The recommendations in this advice only remain current for a period of thirty (30) days from the date of this advice. If you wish to implement these recommendations after this time period you must contact us prior to acting to ensure that none of the above factors have changed and that the recommendations remain appropriate to you.

Cooling Off Rights

In respect of the specific financial products we recommend as part of our advice you may be entitled to a 14 day cooling off period. If a 14 day cooling off period applies, it commences from the earliest of when you receive confirmation of your policy/investment or the end of the fifth day after the product was purchased by or issued to you. Cooling off periods apply to risk insurance products (general and life), investment life insurance products, unlisted managed fund products, superannuation products, and Retirement Savings Accounts: Insurance – within this period, you can change your mind and request that your policy be cancelled and premium refunded. Your refund will be the amount of premium paid. Investment – within this period, you can change your mind and request for your capital to be returned to you. You may, however, get back less or more than what you originally invested as a result of market movements. You should refer to the Product Disclosure Statement for each of the recommended investments/policies in order to understand the operation of each provider’s cooling off period.

Assumptions and Illustrations

The projections contained within this advice are based on a number of critical assumptions that primarily relate to economic and investment conditions and legislation. Also illustrations of future income and capital growth rates are based on market or investment managers’ past performances. As a consequence, the ability of the projections to predict actual long term outcomes is limited. Accordingly such figures are illustrations and Equipsuper Financial Planning Pty Ltd does not guarantee the outcome of these projections and are intended as a guide only.


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For the figures used, please refer to the Assumptions. In addition, the taxation estimates are intended as a guide only and are dependent on the continuation of current taxation treatment of deductible expenses as well as current tax scales and Medicare Levy. While every effort has been made to include current and relevant tax and social security legislation we advise you to discuss your annual tax liability and the tax and social security implications of this with your accountant or a qualified tax adviser. In relation to any social security entitlements we recommend you make an appointment with a representative of Centrelink at your nearest Centrelink office for an assessment of your actual entitlements.

Limitation of Liability

In the event that any advice or other services rendered by Equipsuper Financial Planning Pty Ltd constitute a supply of services to a consumer under the Competition and Consumers Act 2010 (as amended) or the Australian Securities and Investments Commission Act 2001, then the liability of Equipsuper Financial Planning Pty Ltd for any breach of any conditions or warranties implied under the Act shall not be excluded but will be limited to the cost of having the advice or services supplied again. Subject to the above paragraph, nothing in any paragraph of this disclosure affects any rights or remedies to which you may be entitled under the Competition and Consumers Act 2010 (as amended) or under the Australian Securities and Investments Commission Act 2001 or under the Corporations Act 2001 (Cth) as a consequence of services being rendered by Equipsuper Financial Planning Pty Ltd. Each paragraph of this disclaimer shall be deemed to be separate and severable from each other. If any paragraph is found to be illegal, prohibited or unenforceable, then this shall not invalidate any other paragraphs.


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WHERE TO FROM HERE?

We recommend that you read the enclosed Product Disclosure Statement(s) (PDS) and Appendices. Please contact us should you have any questions about the information or would like any part of the Statement of Advice explained further. Once you are satisfied with our recommendations and wish to proceed, we will assist you with the implementation of your Statement of Advice. The first step in the implementation process is for you to sign the ‘Authority to Proceed’.

Relevant Paperwork

Below is a summary of the relevant paperwork required for you to complete in order to implement the recommendations:

Relevant Recommendation Action

Super and Pension Rollovers – Paul and Pauline Both to complete Equip Rollover Authority form and Pauline to complete Equip Membership Application (and relevant Colonial First State forms)

Self-Employed Personal Deductible Contribution - Paul Complete Application to Make Voluntary Contributions form

Equip TRPs – Paul and Pauline Both to complete Equip Application for a Pension and Paul to complete Tax File Number Declaration (as you are under age 60)

Member Investment Choice – Paul Complete Investment Choice Variation Form (Super)

Non-Concessional Super Contributions – Pauline Pauline to complete Equip Application to Make a Voluntary Contribution for non-concessional contribution

Please note that we are able to assist you to complete any of the above forms.

Relevant Recommendation Required Documents

Transition to Retirement Pensions Copy of Drivers Licence or Passport

Transition to Retirement Pensions Original bank statement for the account you would like the pension payment to be paid into.

Please refer documentation to: Kristine Spiteri Representative of Equip Financial Planning Pty Ltd Level 57, 19-29 Martin Place SYDNEY NSW 2000


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AUTHORITY TO PROCEED

Upon receiving the advice dated 16 February 2015 and reading the strategy and recommendations contained within, we confirm the following:

We have received and retained a copy of the Financial Services Guide.

The details in relation to our personal circumstances, financial position and lifestyle and financial objectives are accurately summarised.

We understand the basis of the advice.

We understand the recommendations made, and where we did not, we have sought and received clarification.

We understand and agree with the risk profile assessment, and the recommended asset allocation of the portfolio.

We confirm we have been provided with and understand the information about remuneration (including commissions) and other benefits paid or payable as a result of this SoA.

We have received and retained the research pages provided and the applicable Product Disclosure Statements.

We understand the projected returns illustrated in this advice and attachments are not guaranteed.

The contents of the advice are for our sole use.

The advice was prepared by Kristine Spiteri acting on behalf of Equipsuper Financial Planning Pty Ltd, an Australian Financial Service Licence (No. 455010 ), when providing this advice.

We understand that the strategy and recommendations made in this advice rely on the continuation of current legislation.

We have received information regarding our rights under the Privacy Act and consent to the information collected being used in the manner described within and to the passing of information to a third party, which Equipsuper Financial Planning Pty Ltd may use from time to time for the purpose of preparing financial reports for us (the third party Equipsuper Financial Planning Pty Ltd has contracted to perform this function, have agreed to abide by the Privacy Policy).

Accordingly, we wish to proceed with the implementation of the strategy and recommendations and authorise Equipsuper Financial Planning Pty Ltd to implement these. Where there are variations these are noted below: …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...……………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...… …………………………………….…………………………………….…………………………………….……………………………………...…


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Signed: Signed:

Name: Paul Xuereb Name: Pauline Xuereb

Date: Date:

Accepted for and on behalf of Equipsuper Financial Planning Pty Ltd by:

Signed:

Name: Kristine Spiteri

Date:


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Page 42 of 69

FINANCIAL MODELLING

To assist you to understand the effects of the recommendations made in this Statement of Advice, we have prepared projections of your personal and financial circumstances. Please note that all projections provided should be used as a guide only, and do not constitute a guarantee of future investment performance or of your financial position at any point in time. Projections are based on current legislation, tax rates and Centrelink procedures where applicable.

Summary of Assumptions

You implement all recommendations in this Statement of Advice.

Paul, you continue working until retirement at 21 October 2018. Your current gross income of $25,000 p.a. increases at 3% p.a.

Pauline, you continue working until retirement at 2018. Your current gross income of $40,394 p.a. increases at 3% p.a.

We have assumed living expenses of $35,000 p.a. between now and 1 July 2016 (Pauline’s approximate net income, as you stated you are currently living solely off Pauline’s income). We have included a separate amount of $15,000 in the 2015-16 financial year for your planned overseas travel. From 1 July 2016 we have assumed living expenses of $50,000 p.a., which includes allowance of $15,000 p.a. for ongoing domestic and international travel. You meet the cost of your planned 2015 travel with funds held in Paul’s business account, after which your ongoing travel expenses are absorbed by your various inflows (earned income and pension income).

You each continue to make $1,000 non-concessional contributions to super until your respective retirements, to be eligible to receive the Government co-contribution. You withdraw $2,000 to fund these contributions in the current financial year, after which they are funded from ongoing employment income.

You both also continue to make personal deductible and salary sacrifice contributions to super until your respective retirements, such that your personal income tax liabilities are minimised.

Provision has also been made for your planned home renovations in the 2015-16 financial year at a cost of $5,000.

We have not included your credit card debt in the financial modelling (currently $15,300 as this is used for day-too-day living expenses and you stated that you repay the balance in full each month.

You both consolidate your pension and accumulation accounts into a new Account Based Pension at your respective retirements.

Your super and pension assets earn a Balanced rate of return of 7.68% p.a. This rate of return is net of fees.

The value of your home increase at 4% p.a.

Your bank accounts earn interest of 4% p.a. All interest generated is reinvested (as opposed to being received as income).

Your shares earn 6% growth and 4% income, with 70% of the income franked. All dividends generated from your shares are received as income (as opposed to being reinvested).

Cashflow surpluses are directed to your joint bank account.


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Cashflow

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 Income Self-employed Income - Paul 9,726 25,750 20,273 6,249 27,318 8,634 0 0 0 0 Gross Income - Pauline 15,715 41,606 32,757 0 0 0 0 0 0 0 Pension Income TRP/ABP Income - Paul 12,068 31,465 24,956 7,692 33,878 10,786 28,348 41,972 43,429 44,937 TRP/ABP Income - Pauline 3,096 10,090 7,922 3,594 15,350 4,838 10,930 16,198 16,639 17,092 Cash Withdrawals 2,000 20,000 0 0 0 0 0 0 0 0 Superannuation Lump Sum Withdrawals (Govt Payments) 0 0 0 0 924 0 0 500 0 0 Total Inflow 42,605 128,910 85,909 17,536 77,470 24,259 39,277 58,670 60,068 62,029 Expenditure Living Expenses (including travel from 1/7/16) 13,616 36,050 40,547 12,498 54,636 17,268 39,007 57,964 59,703 61,494 Travel 0 15,000 0 0 0 0 0 0 0 0 Renovations 0 5,000 0 0 0 0 0 0 0 0 Taxation Paul 560 806 0 819 734 0 0 0 0 0 Pauline 726 39 0 -6 -453 0 -356 -550 -604 -665 Superannuation Contributions Salary Sacrifice – Pauline 15,715 20,500 14,000 0 0 0 0 0 0 0 Deductible Contributions - Paul 9,000 16,000 0 18,000 20,000 0 0 0 0 0 Non-Concessional Contributions - Paul 1,000 1,000 1,000 0 1,000 1,000 0 0 0 0 Non-Concessional Contributions - Pauline 1,000 1,000 1,000 0 0 0 0 0 0 0 Total Outflow 41,618 95,396 56,547 31,311 75,918 18,268 38,651 57,414 59,098 60,829 Net Cashflow 988 33,515 0 15,586 1,552 0 6,617 1,256 970 1,200


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Tax (Paul)

Date 1 Jul 14 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21

Age - Paul 55.7 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7

Age - Pauline 64.2 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2

Income

Self-employed Income 25,000 25,750 20,273 6,249 27,318 8,634 0 0 0 0

Superannuation Income Streams – Taxed Element 11,166 29,101 23,081 7,115 31,333 9,976 79 0 0 0

Investment Earning 1,369 1,473 1,683 535 2,602 840 1,921 2,980 3,125 3,269

Total Assessable Income 37,534 56,324 0 58,936 61,254 0 21,450 2,980 3,125 3,269

Deductions

Self-employed Deductible Contributions 9,000 16,000 0 18,000 20,000 0 0 0 0 0

Total Deductions 9,000 16,000 0 18,000 20,000 0 0 0 0 0

Taxable Income 28,534 40,324 0 40,936 41,254 0 21,450 2,980 3,125 3,269

Gross Tax Payable 1,964 4,441 0 4,643 4,748 0 389 0 0 0

Non-Refundable Tax Offsets

Low Income Tax Offset 445 267 0 272 280 0 300 300 300 300

Superannuation Income Streams Rebate (15%) 1,675 4,365 0 4,529 4,700 0 1,508 0 0 0

Total Non-Refundable Tax Offsets 2,120 4,632 0 4,801 4,980 0 1,808 300 300 300

Tax Payable 0 0 0 0 0 0 0 0 0 0

Levies

Medicare Levy 571 806 0 819 734 0 0 0 0 0

Net Tax Payable 571 806 0 819 734 0 0 0 0 0

Average Tax Rate 1.52% 1.43% 0.00% 1.39% 1.20% 0.00% 0.00% 0.00% 0.00% 0.00%

Marginal Rate (excl Medicare) 19.00% 33.00% 0.00% 33.00% 33.00% 0.00% 19.00% 0.00% 0.00% 0.00%


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Tax (Pauline)

Date 1 Jul 14 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 55.7 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.2 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 Income Gross Income 40,394 41,606 32,757 0 0 0 0 0 0 0 Investment Earning 2,693 2,710 2,724 880 4,103 1,347 3,101 4,801 5,128 5,474 Franking Credits 397 374 314 104 453 153 356 550 604 665 less Salary Sacrifice Contributions 15,715 20,500 14,000 0 0 0 0 0 0 0 Total Assessable Income 27,769 24,190 0 22,780 4,557 0 4,957 5,351 5,733 6,139 Taxable Income 27,769 24,190 0 22,780 4,557 0 4,957 5,351 5,733 6,139 Gross Tax Payable 1,818 910 0 642 0 0 0 0 0 0 Refundable Tax Offsets Franking Credits 397 374 314 104 453 153 356 550 604 665 Total Refundable Tax Offsets 397 374 0 104 453 0 356 550 604 665 Non-Refundable Tax Offsets Low Income Tax Offset 445 300 0 300 300 0 300 300 300 300 Senior Australians Pensioner Tax Offset 0 0 0 681 1,602 0 1,602 1,602 1,602 1,602 Mature Age Worker Tax Offset 500 500 0 500 0 0 0 0 0 0 Total Non-Refundable Tax Offsets 945 800 0 1,481 1,902 0 1,902 1,902 1,902 1,902 Tax Payable 696 -264 0 -104 -453 0 -356 -550 -604 -665 Levies Medicare Levy 555 303 0 99 0 0 0 0 0 0 Net Tax Payable 1,251 39 0 -6 -453 0 -356 -550 -604 -665 Average Tax Rate 4.51% 0.16% 0.00% -0.02% -9.95% 0.00% -7.19% -10.27% -10.54% -10.83% Marginal Rate (excl Medicare) 19.00% 19.00% 0.00% 19.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%


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Superannuation (Paul)

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 ACCUMULATION FUND Investment Profile: Balanced Growth: 2.96% pa (100% taxable) Income: 4.72% pa (11.9% Franked) Opening Value 780,512 14,999 31,898 34,576 50,930 73,845 76,351 500 0 0 Transactions (SOP) > Rollover from Pension 0 0 0 0 0 0 888,699 0 0 0 > Rollover To Pension 775,512 0 0 0 0 0 965,051 0 0 0 > Lump Sum Withdrawals 0 0 0 0 0 0 0 500 0 0 Other Contributions after Tax (SOP) 8,650 14,600 1,000 15,300 18,000 1,000 0 0 0 0 > Self-employed Contributions 9,000 16,000 0 18,000 20,000 0 0 0 0 0 > Non-Concessional Contributions 1,000 1,000 1,000 0 1,000 1,000 0 0 0 0 > less Withheld Contribution Tax 1,350 2,400 0 2,700 3,000 0 0 0 0 0 Earnings 399 2,273 1,914 877 5,294 1,719 0 0 0 0 Contributions (EOP) 500 306 0 285 275 0 500 0 0 0 > Govt Co-contribution* 500 306 0 285 275 0 500 0 0 0 Tax Payable (EOP) 49 281 236 108 654 212 0 0 0 0 Low Income Super Contribution 500 0 0 0 0 0 0 0 0 0 Closing Value 14,999 31,898 34,576 50,930 73,845 76,351 500 0 0 0

*Paul, please note that due to recent changes to Government legislation, you may not be eligible to receive the Government Co-contributions shown above. These contributions will not have a significant impact on the long term outcomes illustrated in the financial modelling and the associated long-term income and assets graphs (see earlier Projected Key Results section).


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Superannuation (Pauline)

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 ACCUMULATION FUND Investment Profile: Balanced Growth: 2.96% pa (100% taxable) Income: 4.72% pa (11.9% Franked) Opening Value 228,952 47,046 73,511 93,532 924 0 0 0 0 0 Transactions (SOP) > Rollover from Pension 0 0 0 211,569 0 0 0 0 0 0 > Rollover To Pension 198,948 0 0 305,100 0 0 0 0 0 0 > Lump Sum Withdrawals 0 0 0 0 924 0 0 0 0 0 Other Contributions after Tax (SOP) 14,358 18,425 12,900 0 0 0 0 0 0 0 > Salary Sacrifice Contributions 15,715 20,500 14,000 0 0 0 0 0 0 0 > Personal Contributions 1,000 1,000 1,000 0 0 0 0 0 0 0 > Spouse Contributions 0 0 0 0 0 0 0 0 0 0 > less Withheld Contribution Tax 2,357 3,075 2,100 0 0 0 0 0 0 0 Contributions after Tax (MOP) 1,269 3,360 2,645 0 0 0 0 0 0 0 > Employer Contributions 1,493 3,953 3,112 0 0 0 0 0 0 0 > less Withheld Contribution Tax 224 593 467 0 0 0 0 0 0 0 Earnings 1,314 5,157 5,105 0 0 0 0 0 0 0 Contributions (EOP) 263 160 0 424 0 0 0 0 0 0 > Govt Co-contribution 263 160 0 424 0 0 0 0 0 0 Tax Payable (EOP) 162 637 630 0 0 0 0 0 0 0 Low Income Super Contribution 0 0 0 500 0 0 0 0 0 0 Closing Value 47,046 73,511 93,532 924 0 0 0 0 0 0


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Page 48 of 69

Assets

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 Total Assets - Paul Business Account 15,000 233 243 250 253 263 266 273 284 296 Superannuation 13,650 29,599 32,898 49,876 68,930 74,845 0 0 0 0 Transition to Retirement Pension 775,512 786,618 816,207 839,481 846,944 878,802 0 0 0 0 Total 804,162 816,451 849,348 889,607 916,126 953,909 965,317 988,581 1,023,231 1,059,110 Total Assets - Pauline CBA Shares 30,000 31,167 34,284 36,904 37,774 41,551 42,826 45,795 50,374 55,412 Superannuation 44,362 65,471 86,411 0 0 0 0 0 0 0 Transition to Retirement Pension 198,948 201,797 207,290 0 0 0 0 0 0 0 Account Based Pension 0 0 0 305,100 307,007 315,363 317,936 323,964 332,782 341,840 Total 273,310 298,435 327,985 342,005 344,781 356,915 360,762 369,759 383,157 397,252 Total Assets - Joint Bank Account 76,000 73,170 109,612 112,963 129,614 136,351 138,025 148,469 155,664 162,860 Principal Residence 490,000 497,625 517,530 533,354 538,381 559,916 566,788 582,503 605,803 630,035 Total 566,000 570,796 627,142 646,317 667,995 696,267 704,813 730,972 761,467 792,895 Grand Total 1,643,472 1,685,682 1,804,475 1,877,929 1,928,902 2,007,091 2,030,892 2,089,312 2,167,855 2,249,258 Grand Total (PV) 1,643,472 1,636,584 1,700,891 1,770,128 1,765,218 1,783,274 1,804,421 1,802,259 1,815,544 1,828,852


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Transition to Retirement and Account Based Pensions (Paul)

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 Inv Profile: Balanced ROR: 7.68% pa Transition to Retirement Pension Opening Value 775,512 786,618 816,207 839,481 846,944 878,802 888,699 0 0 0 Transactions (SOP) > Rollover to Accumulation Fund 0 0 0 0 0 0 888,699 0 0 0 Income Drawdown 12,068 31,465 24,956 7,692 33,878 10,786 0 0 0 0 > Minimum Withdrawal 12,068 31,465 24,956 7,692 33,878 10,786 0 0 0 0 > Maximum Withdrawal 77,551 78,662 81,621 56,665 84,694 87,880 0 0 0 0 > Tax Assessable Drawdown Amount (Taxed) 11,162 29,101 23,081 7,115 31,333 9,976 0 0 0 0 > Tax Exempt Drawdown Amount 907 2,364 1,875 578 2,545 810 0 0 0 0 Earnings after Credits 23,175 61,053 48,230 15,155 65,736 20,684 0 0 0 0 Closing Value 786,618 816,207 839,481 846,944 878,802 888,699 0 0 0 0 Account Based Pension Inv Profile: Balanced ROR: 7.68% pa Opening Value 0 0 0 0 0 0 965,051 988,308 1,022,947 1,058,815 Income Drawdown 0 0 0 0 0 0 28,348 41,972 43,429 44,937 > Minimum Withdrawal 0 0 0 0 0 0 26,757 39,532 40,918 42,353 > Maximum Withdrawal 0 0 0 0 0 0 965,051 988,308 1,022,947 1,058,815 > Tax Assessable Drawdown Amount (Taxed) 0 0 0 0 0 0 79 0 0 0 > Tax Exempt Drawdown Amount 0 0 0 0 0 0 28,269 41,972 43,429 44,937 Earnings after Credits 0 0 0 0 0 0 51,605 76,611 79,297 82,078 Closing Value 0 0 0 0 0 0 988,308 1,022,947 1,058,815 1,095,956


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Transition to Retirement and Account Based Pensions (Paul)


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Transition to Retirement and Account Based Pensions (Pauline)

Date 9 Feb 15 1 Jul 15 1 Jul 16 6 Apr 17 1 Jul 17 1 Jul 18 21 Oct 18 1 Jul 19 1 Jul 20 1 Jul 21 Age - Paul 56.3 56.7 57.7 58.5 58.7 59.7 60.0 60.7 61.7 62.7 Age - Pauline 64.8 65.2 66.2 67.0 67.2 68.2 68.5 69.2 70.2 71.2 Inv Profile: Balanced ROR: 7.68% pa Transition to Retirement Pension Opening Value 198,948 201,797 207,290 211,569 0 0 0 0 0 0 Transactions (SOP) > Rollover to Accumulation Fund 0 0 0 211,569 0 0 0 0 0 0 Income Drawdown 3,096 10,090 7,922 0 0 0 0 0 0 0 > Minimum Withdrawal 3,096 10,090 7,922 0 0 0 0 0 0 0 > Maximum Withdrawal 19,895 201,797 207,290 0 0 0 0 0 0 0 > Tax Exempt Drawdown Amount 3,096 10,090 7,922 0 0 0 0 0 0 0 Earnings after Credits 5,945 15,583 12,201 0 0 0 0 0 0 0 Closing Value 201,797 207,290 211,569 0 0 0 0 0 0 0 Account Based Pension Opening Value 0 0 0 305,100 307,007 315,363 317,936 323,964 332,782 341,840 Income Drawdown 0 0 0 3,594 15,350 4,838 10,930 16,198 16,639 17,092 > Minimum Withdrawal 0 0 0 3,594 15,350 4,838 10,930 16,198 16,639 17,092 > Maximum Withdrawal 0 0 0 305,100 307,007 315,363 310,525 323,964 332,782 341,840 > Tax Exempt Drawdown Amount 0 0 0 3,594 15,350 4,838 10,930 16,198 16,639 17,092 Earnings after Credits 0 0 0 5,501 23,707 7,411 16,958 25,016 25,697 26,397 Closing Value 0 0 0 307,007 315,363 317,936 323,964 332,782 341,840 351,145


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Transition to Retirement and Account Based Pensions (Pauline)


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APPENDIX

These appendices provide more technical detail to the subjects that have been referred to within this Statement of Advice. They are included to give you more detail about the topics discussed. They are not intended to be comprehensive in the information that you may require. You should seek professional advice from your taxation and/or legal adviser, Centrelink or the relevant Government authorities.

The Investment Asset Classes

In deciding the appropriate mix of assets that will form your investment portfolio you can choose from four broad classes of asset:

Cash – Considered the safest asset class, cash funds are available at short notice and have low risk of capital loss. The ‘cost’ of this low level of risk is that cash funds generally offer very low rates of return with no tax benefits.

Fixed Interest – Although a range of fixed interest securities are available most have the same core characteristics, including a fixed investment term, regular interest payments (higher than cash funds) and a low level of capital loss.

Property – Considered to be a growth asset due to higher long term returns, property investments can provide a combination of income (via rental payments) and capital growth (via increases in property values).

Shares – Provide investors with part ownership of a company and the associated benefits (eg dividend income, share price increases) and risks (eg capital volatility, economic downturns).

The table below compares the returns of each of the above asset classes, and demonstrates the volatility of returns:


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The Risk/Return Trade Off

One of the central concepts of investment theory is that there is a positive relationship between the level of risk of an investment and its expected level of return – i.e. the higher the risk the higher the expected return, and vice versa. Although logically most investors would prefer low risk, the risk/return trade off would limit the potential for higher returns. Although some asset classes (particularly shares and property) can demonstrate significant volatility over the short term, history has shown that over the long term these fluctuations can be smoothed out and higher returns can be generated by implementing two main strategies: diversifying your funds across and within a range of different investments, and recognising that different investments have different time frames. There are a variety of risks associated with investing, including the following:

Mismatch risk – the chosen investment may not be suitable for your needs, goals and circumstances

Inflation risk – the real purchasing power of your invested funds may not keep pace with inflation

Reinvestment risk – if you rely on fixed rate investments you may have to reinvest maturing money at a lower rate of interest

Market risk – movements in the market mean the value of your investment can go down as well as up – and sometimes suddenly

Timing risk – trying to time entry to and exit from markets can expose you to potentially greater short-term volatility

Risk of not diversifying – if you put all of your capital into one market a fall in that market will adversely affect all of your capital

Liquidity risk – you may not be able to access your money as quickly as you need to without suffering a fall in value

Credit risk – the institution you have invested with may not be able to make the required interest payments or repay your funds

Legislative risk – your investment strategies or products could be affected by changes in current laws and regulations

Value risk – you may pay too much for the investment or sell it too cheaply

Manager risk – the personnel or ownership of the fund manager may change so that the manager no longer has access to the skills or attitudes that contributed to earlier performance levels

Currency risk – investments in assets located in other countries may rise or fall in value due to the relative value of the Australian currency.


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GENERAL INFORMATION

Superannuation - Introduction

Superannuation is a tax effective vehicle for accumulating wealth for your retirement. Superannuation investments are eligible for special tax concessions that are not available to other types of investments. Benefits you should be aware of when considering investing in the superannuation environment are:

You receive significant tax concessions on your investment earnings. Income and capital gains derived from your superannuation investments are taxed at a maximum rate of 15% (capital gains are taxed at 10% where investments have been held for longer than one year).

You can add to your investment on a regular basis.

You may be eligible to receive a tax deduction for your superannuation contributions.

Your access to your superannuation capital is restricted. Your superannuation capital can only be accessed once you meet a condition of release (this generally occurs at retirement after preservation age or at age 65). However, there is also an opportunity to access your superannuation benefits prior to retirement via a ‘Transition to Retirement’ strategy.

Your superannuation benefits can be used to commence a tax effective income stream in retirement.

Superannuation Guarantee Contributions (SGC)

The Superannuation Guarantee (SG) is a Commonwealth Government program that has applied from 1 July 1992. The program requires all employers to make minimum contributions to a complying superannuation fund for their employees. An employer includes the public and private sector, tax exempt organisations and family companies or trusts if they pay salary or wages. The current annual rate of SGC is equal to 9.5% of Ordinary Time Earnings (required to be paid at least quarterly). The maximum level of salary used to calculate SG is $197,720 for the financial year 2014/15, equating to maximum compulsory contributions of $18,783.40 per annum. Employers have 28 days after the end of the quarter to pay the required SG amount for employees, if they do not do so, then they are required to pay the Superannuation Guarantee Charge (SGC).

Salary Sacrifice

Salary Sacrificing involves establishing an arrangement with your employer where you forego pre-tax salary income to make additional contributions to superannuation. The contributions are taxed at 15% when entering your superannuation fund compared with being taxed at your marginal tax rate. Salary sacrifice contributions are classified as Concessional Contributions. Concessional Contributions are currently limited to $30,000 per annum for those under 50 years of age and $35,000 for those over age 50 on the last day of the financial year. This amount includes any Superannuation Guarantee payments made by your employer.


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Government Co-contribution

In order to qualify for the Government co-contribution, there are three tests that must be met to qualify:

the work test,

the income test and

the age test

Work Test

To be eligible for the work test you must earn 10% or more of your income from eligible employment, or from carrying on a business. In addition to this work test, those aged 65 or over but under age 71, will need to meet a second work test. They must be gainfully employed for at least 40 hours in a period of not more than a 30 consecutive days, in the financial year that you make a contribution. Income Test To be eligible for the co-contribution your total income must be less than $49,488 for the 2014/15 financial year and you must make an eligible personal contribution to superannuation in that year. For co-contribution purposes, ‘total income’ is equal to assessable income plus reportable employer superannuation contributions (eg salary sacrifice) plus reportable fringe benefits such as a car. It also includes any net capital gains from shares and property. Where your total income is less than $34,488 (2014/15) in a financial year, the government will contribute 50 cents for every $1 of non-concessional contributions (after tax) you make up to a maximum of $500. The co-contribution reduces by 3.333 cents for each dollar for incomes above $34,488, and the entitlement ceases once your total income reaches $49,488 per annum. By way of example, if you earn $40,000 total income and make an after tax super contribution of $1,000 then you will receive a co-contribution of $284. Age Test You must be less than 71 years of age on the last day of the financial year. You do not need to claim for the co-contribution as the ATO will work out if you are entitled based on the information from your superannuation fund and your tax return. The benefits of this recommendation are:

You will boost your superannuation savings with no additional cost incurred by yourself.

No contribution tax will apply as no tax deduction will be claimed for the contribution.

The co-contribution is treated as a Non-Concessional contribution which has favourable tax concessions.


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Non-Concessional Contribution

A Non-Concessional Contribution is a contribution made to your superannuation fund for which a tax deduction is not claimed. Non-concessional contributions do not attract a contributions tax when entering your superannuation fund and are received tax free when withdrawn or used to commence an income stream. Non-Concessional Contributions do not include:

Government Co-Contributions

Contributions relating to personal injury payments

Contributions from the disposal of small business assets (up to $1.1 million indexed as at 1 July 2009)

Contributions paid out as a super benefit in the same year that they are contributed as an untaxed element (this would generally apply to untaxed schemes)

Roll-over superannuation benefit

Amounts that are specifically excluded from a fund's assessable income because they are included in the Concessional Contributions cap.

Contributions made directly by a taxpayer into their spouse's account as these will be counted against the receiving spouse's Non-Concessional Contribution cap.

Non-Concessional Contributions are capped at $180,000 a year. Individuals aged less than 65 at any time during the financial year can contribute up to $540,000 by bringing forward two years of contributions. Contributions in excess of the cap are taxed at 46.5% (including Medicare levy).

Withdrawal & Re-contribution

A ‘withdrawal and re-contribution’ strategy involves recycling the make-up of the superannuation components within a fund prior to the commencement of an income stream in order to maximise the tax free component. The strategy minimises the tax payable on an income stream where you are less than 60 and can also assist in minimising tax payable by your estate. Increasing the tax free component of the fund achieves two major benefits:

Improved tax effectiveness of income streams for those aged between 55-59 years of age. Part of the income stream which would previously have been taxable will be received tax free as a result of the strategy.

In the event of death, a higher tax free amount reduces the tax payable on lump sums received by non-dependant beneficiaries (such as adult children). The taxable component of a death benefit is taxed at 16.5% when received by non-dependants, compared to nil tax on the tax free component.


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Taxation of Super Withdrawal

When part of a superannuation benefit is paid out as a lump sum (or as an income stream) it will include both a tax-free and taxable component, with the relevant portions of each reflecting the proportions such components make up the total value of the superannuation benefit. For lump sum superannuation benefits, the tax-free and taxable components are worked out based on the value of the superannuation interest just before the lump sum is paid. For pensions, the tax-free and taxable components are determined on the value of the superannuation amount at the time that the income stream is created.

Age Taxation (includes Medicare levy)

Element taxed in the fund

Below preservation age Taxable component subject to 22%

Over preservation age but less than 60 Nil tax up to low rate cap of $185,000; then

17% on balance above $185,000

60 and over Tax free

Element untaxed in the fund

Below preservation age 32% up to untaxed plan cap amount of $1,355,000; then

49% on amount above cap

Over preservation age but less than 60 17% up to low rate cap amount of $185,000; then

32% between $185,001 and untaxed plan cap of $1,355,000, then

49% on amount above the untaxed plan cap

60 and over 17% up to the untaxed cap amount of $1,355,000per superannuation plan; then

49% on amounts above the cap

Preservation

Generally, when making a contribution to super your funds become ‘preserved’, meaning you can’t access the funds. Preserved monies are required to be held within the superannuation environment until:

You retire after reaching preservation age. If less than 60 years of age, a condition of release is only met where the trustee is satisfied you have no intention to ever again become gainfully employed (you need to make a declaration to this effect).

You cease an employment arrangement after reaching 60 years of age (including changing from one employment contract to another) The preservation age differs according to when you were born, as shown in the following table:

Year born Preservation age

Before 1 July 1960 55

1 July 1960 – 30 June 1961 56

1 July 1961 – 30 June 1962 57

1 July 1962 – 30 June 1963 58

1 July 1963 – 30 June 1964 59

After 1 July 1964 60


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Once preservation age is reached, members also have the option of accessing their preserved superannuation monies via a non-commutable income stream prior to meeting a condition of release. There are other conditions of release that cater for total and permanent disablement and financial hardship, which are not aged based and may allow earlier release of superannuation benefits.

Transition to Retirement

‘Transition to Retirement’ refers to the opportunity for people who have reached their preservation age to continue working on a part-time or full time basis and supplement their salary with a regular income from their superannuation savings via a non-commutable income stream Transition to Retirement strategies provide the following opportunities:

You can increase your income prior to retirement.

You can reduce your hours of work and receive a similar level of income.

You can reduce your tax payable prior to retirement.

You can increase your retirement savings.

You can move your superannuation assets into the pension phase where earnings are tax free (compared with paying a tax of up to 15% within the accumulation phase).

Salary Sacrifice

Salary Sacrificing involves foregoing salary income and making pre-tax contributions through an arrangement with your employer, thereby reducing the amount of tax payable on your income. The benefit from Salary Sacrifice comes from the difference between the income tax that would have been paid on the income amount, and the rate of tax (either contributions tax or fringe benefits tax) payable on the item under the Salary Sacrifice arrangement. Concessionally taxed contributions to superannuation are currently limited to $30,000 per annum for those under 49 years of age and $35,000 for those over age 50 on the last day of the financial year. This amount includes any Superannuation Guarantee payments made by your employer. Where the ATO identifies that a person’s concessional contributions have exceeded the cap, the amount in excess will be taxed at the person’s marginal tax rate, plus a Government interest charge.

Transition to Retirement Pension (TRP)

A TRP is an Account Based Pension that has been commenced using the ‘Transition to Retirement’ provisions. In conjunction with the recommended Salary Sacrifice strategy we recommend you commence a TRP in order to supplement your reduction in salary. A minimum income limit applies to TRP payments which is equal to 4% (for the 2014/15 financial year) of the account balance up to age 65. A maximum limit equal to 10% of the account balance also applies. Account Based Pension payments are tax free for individuals over 60 years of age and do not have to be included in tax returns.


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Payments made to individuals less than 60 years of age are taxable but receive tax concessions. The pension drawn, less any tax free amount, is taxed at your marginal tax rate. A 15% tax rebate applies to the difference, which is taxable income. The tax rebate can be used to reduce an income tax liability arising from this pension as well as other income sources. When you retire or reach 65 years of age your TRP becomes unrestricted non preserved, meaning you can access your capital (the income stream in no longer non-commutable). The benefits of commencing a Transition to Retirement Pension are:

The income received from your TRP will assist in meeting your cost of living requirements.

Pension payments are tax effective.

Your Account Based Pension fund pays no tax on earnings or capital gains on investments in the fund (based on current legislation).

You have the flexibility to adjust your pension payment between the minimum and maximum limits.

Upon rollover of your accumulated superannuation benefits to an Account Based Pension, there is generally no lump sum tax payable.

The pension is paid as regularly as you require to enable you to manage your cashflow, eg: monthly, quarterly, half yearly or annually and can be credited to your nominated bank account, building society, credit union or paid to you by cheque. The risks associated with commencing a Transition to Retirement Pension are:

If the income drawn from your TRP exceeds the level of superannuation contributions you will accelerate the depletion of your retirement capital.

You are restricted from making commutations from your TRP. There are however exceptions which include, but are not limited to, the following: Unrestricted Non Preserved funds can be accessed. Capital is being rolled back into the accumulation phase. You meet a full condition of release (this will be achieved at retirement). You use the proceeds to purchase another non-commutable income stream.

Account Based Pension

An Account Based Pension is purchased with superannuation monies and is designed to provide you with a regular, flexible, tax effective income stream in retirement. Account Based Pension balances increase with positive investment returns and decrease with pension payments, negative investments returns and fees. Earnings from the underlying portfolio of your Account Based Pension are tax free, making Account Based Pensions a very tax effective retirement structure. From the 2013/2014 financial year, the minimum pension payment factors return to normal (see table below) after the government allowed a reduction in the drawdown pension payment for previous years.


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Age Original Percentage of Account

Balance Drawdown Percentage for

2013/14 Onward

55 – 64 4% 4%

65 – 74 5% 5%

75 – 79 6% 6%

80 – 84 7% 7%

85 – 89 9% 9%

90 – 94 11% 11%

95+ 14% 14%

* Minimum pension payments are calculated annually (as at 1 July). Account Based Pension payments are tax free for individuals over 60 years of age and do not have to be included in tax returns. Payments made to individuals less than 60 years of age are taxable but receive tax concessions. The pension drawn, less any tax free amount, is taxed at your marginal tax rate. A 15% tax rebate applies to the difference, which is taxable income. The tax rebate can be used to reduce an income tax liability arising from this pension as well as other income sources. The benefits of commencing an Account Based Pension are:

You receive a regular income stream to assist in meeting your retirement income needs.

You receive tax concessions on your Account Based Pension income via a tax deductible amount and a 15% tax offset prior to age 60. Once you reach 60 years of age your pension payments will be tax free.

You can choose the frequency of your pension payments (e.g. monthly, quarterly, half yearly or annually) and payments can be credited to your nominated bank account or paid to you by cheque.

Your Account Based Pension fund pays no tax on income or capital gains generated within the fund.

Upon rollover of your superannuation benefits to an Account Based Pension, there is generally no lump sum tax payable.

Your Account Based Pension portfolio will be invested in accordance with your risk profile. This would not be possible through non-account based retirement income streams such as Annuities.

You have the option of nominating a reversionary beneficiary (usually a spouse) who will receive the pension in the event of death.

The risks associated with this recommendation are:

There is no guarantee you will receive income from your Account Based Pension for your lifetime.

The account balance of your Account Based Pension may reduce to a level which is insufficient to meet your income needs later in life, depending upon the performance of the underlying investments and the level of income and capital you draw over time.


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Age Pension

The Age Pension is a government support payment which assists Australian residents to achieve an adequate level of income when they reach Age Pension age. The amount payable is based on your age, home ownership and marital status as well as the Income and Assets tests. To qualify for the Age Pension the following requirements must be met:

You must be of Age Pension age. The qualifying age for both male and female is 65. The qualifying age for the Age Pension will increase for both men and women born on or after 1 July 1952:

People born between Eligible age for Age Pension

1 July 1952 and 31 December 1953 65 ½

1 January 1954 and 30 June 1955 66

1 July 1955 and 31 December 1956 66 ½

1 January 1957 and later 67

Your income and assets are tested against minimum and maximum limits. Under the Income test, a couple’s combined income from all sources (including income from overseas)is used and applied against the Income test formulas to determine a rate of payment. The Income test thresholds are outlined below.

Shade out threshold

(per fortnight)

$

Cut out threshold

(per fortnight)

$

Single $160.00 $1,868.60

Couple (combined) $284.00 $2,860.00

Illness separated (couple combined) $284.00 $3,701.20

The shade out threshold is the maximum assessable income from other sources where a

pensioner remains entitled to the full pension. The pension reduces by 50c for each dollar of assessable income for a single person and 25c for each dollar of assessable income for couples earning in excess of the shade out threshold.

The cut out threshold is the level of assessable income at which there is no entitlement to a pension. Note: The amount of income you can earn before your payment reduces to $0 may be higher if you are eligible for Rent Assistance.

Under the Assets test, a person may own a certain level of assessable assets (including overseas assets) before their pension is reduced. The value of a person’s home is an exempt asset.


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The Asset test thresholds are outlined below:

Shade out threshold

$

Cut out threshold

$

Homeowner

Single $202,000 $771,750

Couple $286,500 $1,145,500

Illness Separated (couple combined) $286,500 $1,426,000

Non-Homeowner

Single $348,500 $918,250

Couple $433,000 $1,292,000

Illness Separated (couple combined) $433,000 $1,572,500

The shade out threshold is the maximum assessable assets where a pensioner remains entitled to the full pension. The pension reduces by $1.50 per fortnight (single person or couple combined) for each $1,000 of assessable assets in excess of the shade out threshold.

The cut out threshold is the level of assessable assets at which there is no entitlement to a pension.

Both the Income and the Assets test are calculated to determine a rate of payment. The one that results in the lowest amount of benefit is applied. The current rates of pension are outlined below:

Maximum pension rates

(per fortnight)

$

Single $776.70

Couple (each) $585.50

Illness Separated Couple (each) $776.70

The above payments exclude the pension supplement.

Centrelink Concession Cards

Commonwealth Seniors Health Card

The Commonwealth Seniors Health Card (CSHC) provides non-pensioners of Age Pension age access to concessionally priced prescription medicines provided through the Pharmaceutical Benefits Scheme (PBS). The CSHC is not assets tested but is subject to an income test, as follows:

Family situation Adjusted Taxable Income limit

Single $51,500

Couple (combined) $82,400

Couple, illness separated (combined) $103,000

For each child, add $639.60


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You may also be entitled to extra concessions from state and local government authorities. Concessions from state and local government authorities may include:

Reductions in property and water rates.

Reductions in energy bills.

Quarterly Telephone Allowance.

Reduced fares on public transport.

Reductions on motor vehicle registration.

One or more free rail journeys within the state each year.

Pensioner Concession Card (PCC)

The Pensioner Concession Card (PCC) is issued to all recipients of Centrelink pensions (including the Age Pension and the Disability Support Pension) as well as recipients of some Centrelink allowances. Holders of the PCC receive the following concessions:

Free mail redirection from Australia Post when changing address.

Quarterly Telephone Allowance.

Free eyesight test from optometrists who bulk bill Medicare.

Hearing aids through the Commonwealth Hearing Services Program.

Reduced cost medicines through the Pharmaceutical Benefits Scheme.

Various state and local government concessions, including reduced property and water rates, reduced energy bills, reduced public transport costs and reduced motor vehicle registration charges.

Health Care Card The Health Care Card (HCC) provides access to concessionally priced prescription medicines provided through the Pharmaceutical Benefits Scheme (PBS). In addition, holders of the HCC may receive other benefits such as reduced health care costs (including ambulance, dental care and eye care), reduced public transport costs, reduced water rates and reduced energy bills. These extra concessions are provided by state and local government authorities so will vary from state to state. The HCC is not assets tested but is subject to an income test, as follows:

Family situation Average weekly income for 8 weeks previous to applying

Total Income in an 8 week period

Single $524.00 $4,192.00

Couple (combined) $906.00 $7,248.00

Single, or couple combined, with 1 child $906.00 $7,248.00

For each additional child, add $34.00 $272.00

The HCC is automatically issued to recipients of certain Centrelink benefits irrespective of income levels, including Newstart Allowance, Partner Allowance, maximum rate Family Tax Benefit (A) and Parenting Payment.


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Estate Planning

Estate planning is the planning and documentation of your wishes for the distribution of your wealth following death, including assets you own personally as well as assets you control. Estate planning is a specialist area and it is therefore important you obtain professional legal advice in relation to all areas of your estate plan. However we outline below some of the issues you should consider in designing your estate plan.

Wills

A Will is the first step in ensuring the distribution of your estate is actioned in accordance with your wishes. Without a Will upon your death a court controls the distribution of your estate and the persons to whom your estate is distributed to, which may result in delays in asset distribution. It is important to ensure that your Will:

Nominates executors (and successor executors) for your estate who are likely to survive you and who clearly understand your wishes.

Nominates beneficiaries in relation to the whole or part of your estate and nominates second choice beneficiaries, should your first choice predecease you.

Bequeaths monetary value or a percentage of your estate rather than a specific asset, as there is the risk that an asset may not be in existence at the time of distribution of the estate.

Nominates assets to be held in Trust for beneficiaries under 18 years of age. For example you can provide funds for your children’s or grandchildren’s education.

Power of Attorney

This element of your estate plan is designed to be implemented prior to your death so that your affairs can be conducted appropriately. There are three types of Power of Attorney: 1. General Power of Attorney A general Power of Attorney appoints another party to act on your behalf to make decisions in respect of your legal and financial affairs. Subject to its terms, such a document remains in force until you cancel it. However, a general Power of Attorney is automatically terminated when you die, become bankrupt or, become incapable of making reasonable judgments due to disability. 2. Enduring Power of Attorney In contrast, an enduring Power of Attorney is not terminated if you become legally incapable of making your own decisions due to disability. Therefore, this type of document is particularly important if you were to lose mental capacity and required someone else to manage your affairs. Without an attorney, your family would have to apply to a State authority to have an administrator appointed to manage your affairs. This may mean that your assets are frozen for a lengthy period of time and that the subsequent decisions about them may not accord with your family’s overall best interests and wishes. In granting an enduring Power of Attorney, you are giving wide powers to another person to act unfettered on your behalf. In essence, your attorney can conduct any legal and financial affairs that you can. It is essential, therefore, that you take great care in choosing your attorney and that you choose someone you implicitly trust to act in your best interests.


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3. Enduring Power of Guardianship An enduring Power of Guardianship allows someone to make personal and lifestyle decisions for you, which is also not terminated if you become legally incapable of making your own decisions due to disability. You can nominate the types of personal and lifestyle ‘functions’ in respect of which your guardian will have the power to make decisions on your behalf, ie. determining your place of residence A Power of Attorney may only be granted by someone who is over the age of 18 and who is of sound mind at the time of the grant and capable of fully understanding the nature and purpose of the document they are signing. The attorney is not able to do anything illegal while operating under a Power of Attorney, nor are they able to prepare a Will on behalf of the donor or transfer the Power of Attorney to someone else unless specified.

Super Death Benefit Nominations

Death benefits are funds paid upon death by the Trustee of your superannuation fund to your estate or to the beneficiary you have nominated. When nominating a beneficiary it is important you understand that there are implications for each choice you make, including the type of nominations that you make. There are two types of nominations for beneficiaries: binding and non-binding.

Non-Binding Nominations

Many death benefit nominations made by members of superannuation funds are not binding on the superannuation fund trustee. This means that the trustee of the super fund may exercise a discretionary power to determine how the benefit is distributed and to whom.

Binding Nominations

Nominations may also be binding subject to the rules of the trust deed. Recently the Superannuation Industry (Supervision) Regulations were amended so that trustees may, subject to the deed, accept binding nominations. A death benefit will be binding on the trustees if:

The nomination form includes the name of each person(s), or class(es) of person (e.g. spouse), and the allocation of the death benefit amongst nominees is clear;

Each death benefit nominee is a legal personal representative or dependant of the member;

The nomination form is dated and signed by the member in the presence of two adult witnesses, neither of whom is a nominee named in the notice;

The nomination form contains a declaration by the witnesses, stating that the member has signed and dated the nomination form in their presence; and

The nomination is valid.

The nomination is only valid for 3 years, therefore a new nomination form needs to be provided to the trustee every 3 years to ensure that your nomination is valid. You may also change your nomination anytime within the 3 year period. It would be prudent for you to ensure that your nomination is updated.

Regular Review

It is important to review death benefit nominations regularly and to include full details of your beneficiaries – including their relationship to you, their full name and their address.


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Keeping you superfund trustee informed of any changes to your beneficiaries – or changes to their personal details – will make the task of distributing your super much less complex for all involved. Death benefits will have tax implications for the receiving beneficiary, so you should discuss your intentions with your solicitor. You can then ensure your Will fully reflects your intentions as well as make an informed decision on whether to make binding or non-binding nominations.

Estate Planning – Super Death Benefits

Who gets your superannuation when you die?

Strict rules govern how your super is distributed when you die – and it’s important to follow those rules to make sure your money goes to whom you want. One of the most important decisions you make when you join a super fund has nothing at all to do with investment. It revolves around the question of who to nominate as the beneficiaries of your super when you die. It’s a critical question – because if you don’t get it right your savings could be given to someone other than your preferred beneficiaries.

Few Exceptions

When a fund member dies, subject to the trust deed, his or her superannuation may only be paid to:

The member’s spouse

The member’s children

A person who is financially dependent on the member

A person with whom the member has an ’interdependency relationship’

The member’s estate

The beneficiaries you nominate when you join a fund are only a guide, meaning the trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nomination of beneficiaries that you have made, but are not bound by your request. The only exception is where your super fund allows you to make a "binding death benefit nomination". This is a nomination that the trustees are obliged to follow. You may only nominate a spouse, child, financial dependant, or your estate as a beneficiary. If you want someone else, such as a friend or a charity, to receive your savings, you should consider nominating your estate as the preferred beneficiary of your superannuation entitlements. Your super will then be distributed according to the terms of your Will. You will need to nominate the non-dependants as beneficiaries of your Will.

Definition of Dependant under Superannuation Law

A ‘dependant’ for superannuation purposes is:

The member’s ‘spouse’ including de-facto partners but does not include previous spouse.

The member’s ‘children’ including adopted children, step-children and children born outside marriage.

Any person who was ‘financially dependent on the deceased’ at the date of death; and


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A person with whom the member has an ’interdependency relationship’ (s.10A of the SIS Act).

An ‘interdependency relationship’ is defined as one between two persons (whether or not related by family) where:

They have a close personal relationship; and

They live together; and

One or each of them provides the other with financial support; and

One or each of them provides the other with domestic support and personal care.

Pension or Lump Sum?

Depending on the terms of the deed, members may be able to specify whether beneficiaries are to receive a pension or a lump sum. The member may be able to specify that their spouse, children, or financial dependants are to receive a pension. They may also be able to nominate a combination of a lump sum payment and pension payment for each beneficiary. If the deed doesn’t provide for binding death benefit nominations, the form of payment will be at the discretion of the trustees. The trustees may consult the beneficiaries before deciding on the form of payment. Superannuation law allows for death benefits to be paid in any or all of the following methods:

As a lump sum to the member’s spouse.

As a lump sum to the member’s children (both adult and minor children).

As a lump sum to any person who is financially dependent on the member at the date of his/her death.

As a lump sum to a person with whom the member has an interdependency relationship at the date of his/her death.

As a pension to any of the above persons. However, in the case of a dependent child, when the child turns 25 the balance in the fund will have to be paid as lump sum (tax free) unless the child is permanently disabled.

As a lump sum to the deceased person’s estate.

A pension is not able to be reverted to a non-dependant on death. Death benefit payments to non-dependants have to be made as a lump sum.


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Taxation of Super Death Benefits

The tax arrangements that apply to the payment of superannuation death benefits are summarised in the table below. Age of deceased Super death benefit Age of recipient Taxation on taxable component

Superannuation death benefit paid to dependants

Any age Lump sum Any age Tax free

Aged 60 and over Income stream Any age Taxed element - tax free Untaxed element - marginal tax rates with a 10% tax offset

Below age 60 Income stream Aged 60 and above

Taxed element - tax free Untaxed element - marginal tax rate with 10% offset

Under age 60 Taxed element - marginal tax rate with 15% tax offset Untaxed element - marginal tax rate

Superannuation death benefit paid to non-dependants

Any age Lump sum Any age Taxable component - 15% tax rate Untaxed element -30%

Any age Income stream Any age Not applicable, however income streams commenced prior to 1 July 2007 will be taxed as if received by a dependant

* Medicare levy also applies, where applicable. Tax free component is tax free.