Self Mis -Managed Super Funds

Presented by Lincoln Frost Wealth Adviser

This information was prepared by Securitor Financial Group Ltd, ABN 48 009 189 495 AFSL & Australian Credit Licence (ACL) 240687 (Securitor) and is current as at March 2013.

Get personalised advice. Material contained in this presentation is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

This presentation contains general information only and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

All case studies and examples used in this presentation are for illustrative purposes only and nothing in this presentation should be construed as an indication or prediction of future performance or results. Any taxation position described in

this presentation should be used as a guide only and is not tax advice. You should consult a registered tax agent for specific tax advice on your circumstances.

As the rules associated with the super and pension regimes are complex and subject to change and as the opportunities and effects differ based on your personal circumstances, you should seek personalised advice from a financial adviser

before making any financial decision in relation to any matters discussed in this presentation.

General Advice Disclaimer

• Superannuation overview

• Contributing to super; contribution types and limits

• Investment options

• What we see with Barristers

• Debt reduction versus super contributions

• Self Managed Super Funds – what we see

• Self Managed Super Funds – what we do

What we will cover today

• Superannuation system – concessional environment

• Government initiative – people to self fund

Investment environments – where should you invest?

Superannuation overview

Individual Company Superannuation Pension (from age 55)

Tax rate (income) Marginal tax rateUp to 49% 30% 15% 0%

Tax rate (capital gain)

Under 12 months – treated as

incomeOver 12 months –

50% discount

Treated as incomeUnder 12 months – treated as incomeOver 12 months –

33% discount0%

• Concessional:• Personal deductible (self employed) • Employer contributions (including salary sacrifice)

• Non-concessional:• Personal contributions not claimed as a tax deduction• Spouse contributions• Three year bring forward rule

Limits

Contribution types & limits

Financial year Concessional contributions Non-concessional contributions

2013/ 2014 $25,000 If 60yrs and over $35,000 $150,000

2014/ 2015 $30,000 If 50yrs and over $35,000 $180,000

Example: Income $180k-300k, FY15, Debt levy 2%, Medicare levy 2%

Contribute to super – reduce your tax

$35,000 earnings

Tax (49%)$17,150

Individual$17,850

Tax (15%)$5,250

Super Fund$29,750

Annual tax savings Savings over 5 years

$11,900 $59,500

• Income threshold $300,000• Regular 15% tax levied by super fund• Additional 15% applied to lesser of:

• Income above $300,000; and• Amount of contribution made

• Additional 15% on tax levied by ATO after ITR completed• Paid by individual (recoverable from fund)

Contributions tax for higher incomes

Example: $400,000 income, super contribution of $20,000Net contribution to fund: $17,000Excess tax: 15% x lesser of $100,000 and $20,000Excess tax = $3,000

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Before and aft er tax returns (10 years to december 2013)

Gross return After Tax Lowest MTR After Tax Highest MTR Superannuation

CPI2.8

Franking Credits – a little bonusExample: $15,000 of Telstra shares, $700 fully franked dividend

Franking Credits

Tax Rate 49% 15% 0%

Dividend yield 4.67% 4.67% 4.67%

Grossed up dividend $1,000 $1,000 $1,000

Gross tax payable $490 $150 $0

Franking credit rebate

$300 $300 $300

Tax payable $190 Refund $150 Refund $300

After tax yield 3.40% 5.67% 6.67%

Younger Barristers• Very little focus on super contributions in early years• What fund to choose, which investment options to select• Debt reduction preference to super contributions

Older Barristers• In many cases balances under $200,000 in mid 50’s • No clear investment strategy• Uncertainty as to amount of super that is required to support

retirement lifestyle• Uncertainty as to the appropriate mix of investments

approaching retirement

What we see with Barristers

• Look at goals based strategies

• Educate on cash flow, super, debt

• Look at whole picture

• Don’t aim to restrict lifestyle

• Provide clarity on what is possible and what isn’t

What we do with Barristers

• Mathematical versus emotional

• Debt needs over time – house upgrade, renovations etc

• It’s about balance

Put money toward your mortgage or super??

What we do with Barristers

What we do with Barristers

• 1-4 members

• All members are trustees or directors of trustee company

• Trustees are responsible for complying with superannuation

law

• Ability to operate to the full extent of superannuation law

• Sole purpose

Self Managed Super Fund

Do you need an SMSF?

What I want to do Available through personal super products

Available through SMSF

Trade direct shares Yes Yes

Access other investments: ETF, hybrids, listed income notes Yes Yes

Have control over my investments Yes Yes

Own insurance with whichever insurer I want Yes Yes

Purchase bank deposits Yes Yes

Purchase real property Not directly Yes

Purchase other non-typical investments; wine/ art/ collectables

No Yes

• Too much money in cash

• Overweight allocation to Australian shares – banks, mining

• No documented investment strategy/ pro forms strategy from

accountant

• Accountants advice seen as sufficient

• No documented insurance strategy

• SMSF not required in many cases

• TTR Pension strategies underutilised

SMSF – What we see

• Review investment strategy

• Understand retirement needs

• Model contribution strategy needed to hit retirement goal

• Diversify investments – match to risk tolerance

• Document insurance strategy for members

• Track progress regularly and make changes as needed!! – Not set

and forget

• Advise on legislative amendments

SMSF – What to do

• The best investment you can make is to seek advice!

• A good financial adviser will work through each stage of the financial planning process with you, making sure you have a clear understanding of each stage and that you are comfortable with any recommendations they make.

• Their advice will be tailored specifically to your individual needs, circumstances and financial objectives.

Your Best Investment

ODYSSEY

Self Mis -Managed Super Funds

Presented by Lincoln Frost Wealth Adviser