July 25, 2018

Given that self-managed superannuation funds (SMSFs) enjoy substantial tax concessions, it comes as no surprise that the Australian Taxation Office wants to ensure trustees play by the rules and don't take advantage of the system.

Hence the existence of independent SMSF auditors, whose role is to check compliance and maintain the integrity of the SMSF sector through yearly audits.

From July 1, 2019, this will change for eligible SMSFs as a result of the government's 2018 budget announcement that the compulsory audit cycle for SMSFs will be extended from one to three years. This "reward" will be available only to SMSFs which can demonstrate a clear audit report for three consecutive years and have lodged their annual returns in a timely manner.

The rationale is it will assist trustees by reducing red tape. Reality or wishful thinking?

The cost of annual audits depends on many factors such as the number of members, how active the fund has been in terms of its investments, the complexiti...

June 28, 2018

A Perth lawn bowls club that faced closure due to an ageing membership and rising costs has become a thriving community social hub, thanks in part to the conversion of some of its greens to rollerskating rinks.

Mark Cameron, the vice-president of Bayswater Bowling Club, told ABC Radio Perth Focus that closing down was a real possibility seven years ago.

"If it wasn't for the major uproar from the community in Bayswater in being extremely vocal, I think it would have been a done deal," he said.

Media player: "Space" to play, "M" to mute, "left" and "right" to seek.

"We had fewer bowls players and the costs associated with running a bowls club is something that gets on top of many of the small clubs in Australia."

The key to staying open was not to encourage more people to take up lawn bowls, but to open up the club to different sports and introduce social memberships that allowed people to come, even if they weren't playing sport.

Homeless roller hockey meets struggling bowls club

While t...

June 27, 2018

Banks would have to bluntly warn parents planning to guarantee their children's business debts that they risk losing their home, and that many small businesses end up failing, under proposals to the royal commission.

After the commission last month delved into parental guarantees of business loans, Bank of Queensland (BoQ),  Legal Aid NSW and the Finance Sector Union (FSU) backed changes to ensure guarantors were making informed decisions when putting their home on the line.

However, the major banks are resisting further change, arguing current laws and the industry's revamped code of conduct give guarantors enough protection, with one suggesting further change could make it harder to get a loan.

A key issue examined in the royal commission's small business hearings was the risk that family members - particularly those who are elderly or vulnerable - do not always understand the risks they are taking when they agree to guarantee a loan to a loved one.

Currently, banks must encour...

May 26, 2018

Here’s something you might not expect to hear a financial planner say: maybe repaying your debt is the last thing you should do.

We should explain. Not all debt is equal. Financial planners divide debt into two broad types: deductible and non-deductible. As these names suggest, deductible debt lets you claim a tax deduction for the interest that you pay. Non-deductible debt does not. This means that you have to pay the interest on non-deductible debt after you’ve paid tax on your income. In pre-tax terms, this makes non-deductible debt much more expensive, which is the reason why non-deductible debt should be paid off as quickly as possible.

But once you have paid off your non-deductible debt, you should think twice about whether to repay deductible debt. There are a couple of reasons for this.

The first reason is that there is often a better use for your money. Obviously, this will depend on what interest rate you’re actually paying on your deductible debt. But if we assume tha...

March 5, 2018

More employers are stepping up their game to make their workplace more family friendly, by paying employees super while they are on parental leave and actively supporting flexible work options.

When Megan Cross, a senior regulatory compliance manager for HSBC Australia, had her first child in 2016, she missed out on superannuation payments while she was on nine months' leave.

This April she will be going on another maternity leave for about nine months, but this time HSBC will continue to contribute to her super, under a policy introduced last year in an effort to reduce the gender pay gap.

At HSBC, employees get paid superannuation on unpaid parental leave for up to 24 months.

Ms Cross said the contribution made no difference to her decision to take time off for her second child, but it will give her comfort in knowing she will not fall behind financially while she is on maternity leave.

"It gives me peace of mind to know I don't have that gap. It also means should other circumstances aris...

February 25, 2018

IF YOU TAKE a long, wide view, marriage and personal relationships are in fine shape. Parental coercion is weakening; marriages are becoming more egalitarian; enormities such as child marriage are fading. Even in countries where divorce is common, most marriages last. A couple who tied the knot in England or Wales in 2012 can be expected to stay together for 32 years, according to the Office for National Statistics. By contrast, the average pre-industrial English marriage endured for just 15-20 years before one partner perished. The vows in the Anglican wedding service, in which couples promise to love and cherish each other “till death do us part”, used to be laden with doom.

Nor, if only the couples are considered, is the spread of cohabitation anything to worry about. Fewer people have jobs for life these days, or even careers for life, so it seems odd to expect them to leap into lifelong romantic commitments. Demographers used to argue that living together before marriage raised the...

February 22, 2018

We will start this blog with a question. When you spend money, how often do you ask yourself what you won’t be buying as a result of your spend? After all, you can only spend a dollar once. Whenever you buy something, that means there is something else that you cannot buy.

Financial advisers call this the ‘opportunity cost.’ Instead of expressing the price of something in simple dollar terms, the price can be expressed in terms of what else the same money could have been used to purchase. To give you an example: let’s say I only have $100 to spend. I can use that money to buy a microwave oven or a set of noise cancelling earphones. If I buy the oven, I cannot buy the earphones, and vice versa. The opportunity cost of buying the oven is missing out on the earphones. And the opportunity cost of buying the earphones is missing out on the oven.

We often forget about opportunity cost. This is because it is perhaps relatively rare that we are faced with a choice between something like an...

February 20, 2018

Not all debt is the same. Even if the interest rate is.

One of the main differentiators between debt is whether or not you can claim a deduction for the interest. If interest is not deductible, then the interest rate paid is much higher than you might think.

When interest is not deductible, you have to pay tax before you pay the interest. You can see this with an example: If your nominal interest rate is 5%, and you are a 45% taxpayer (the highest tax bracket), the effective interest rate around 9% before tax. To understand this, consider an interest bill of $5000. A person paying tax at 45% has to earn $9000 in order to pay this bill. Of this $9000, they pay $4050 in tax to the tax office, leaving (virtually) $5000 remaining to pay the interest.

When interest is deductible, you don’t have to pay tax before you pay the interest. So you only have to earn $5000 to pay an interest bill of $5000. Here is the effective rate of interest on non-deductible debt for different levels of income:


December 12, 2017

2017 is drawing to a close and we wish you all the very best good fortune of the season. Thank you for being part of our journey in 2017. May this summertime solstice be a peaceful one for you and your loved ones.

During 2017, Australia took the record for the longest period without a recession – 26 years. The signs are strong that 2018 will continue this great run. This record run is a combination of good luck and good management. So, we thought we would end the year by listing out lots of other lucky things about living in Australia. These ‘facts’ have all been sourced from the Internet, so you can be absolutely sure that they are reliable.

  • Australia has three times as many sheep as people;

  • There are also more kangaroos than people in Australia;

  • Perhaps unsurprisingly, the world record jump by a kangaroo is held by an Australian. The record is 9 metres;

  • This record may or may not have been held by the largest kangaroo ever seen. This kangaroo was also an Australian a...

November 6, 2017

Christmas is coming and you probably know someone who is really hard to buy a present for. You might be tempted to buy them a gift voucher. Can we suggest you think again? Unfortunately, gift vouchers are generally a really bad idea. We know, we know – we sound like the Grinch. But let us explain.

You’ve probably heard of the Nobel Prize. This year’s peace prize was awarded to an Australian organization, founded in Melbourne 10 years ago: the International Campaign to Abolish Nuclear Weapons. Well done to all involved!

The Nobel Prize is also awarded for economics. The 2017 award went to an American economist named Richard Thaler. Thaler is a ‘behavioural economist’ – which means that he studies the way people think about their money. If you ever get the chance, read some of his stuff or listen to a podcast. He is a very funny man.

Thaler is best known for identifying a phenomenon known as ‘mental accounting.’ Mental accounting is where people link a specific dollar with a specific purpos...

October 23, 2017

This week we continue our theme of inter-generational financial planning. We turn our attention to the very young members of your family.

Unfortunately, the school system is not that great when it comes to teaching kids about managing money. So, if you have kids of your own, teaching them how to manage their money is your job. We want you to enjoy your parenting, and we want your kids to enjoy managing money. So here are our top tips for teaching kids about money.

Understand that they are watching you. Managing money is not just about words and numbers. Many things affect whether a person manages money well. These include things like temperament, personality – and whether people learn to spend money in order to feel better. (Retail therapy, anyone?)

Guess where kids learn about this ‘emotional’ side of managing money? By watching their folks at very close quarters for the first couple of decades of their lives. Like it or not, your kids will grow up to be very similar to you and their oth...

October 9, 2017

Here is a troubling statistic: in the eight years from 2006 to 2014, the wealth of Australians aged between 65 and 74 increased by an average of $200,000. That sounds good. But the wealth of Australians aged between 25 and 34 decreased on average over the same period. (source: the Grattan Institute).

This increase was entirely due to older people being more likely to own homes – and more likely to own those homes outright (that is, with no debt) – than their younger counterparts.

Unfortunately, in many places, since 2014 the differences have simply gotten worse, as house prices continue to rise. While older people probably enjoy the fact that their wealth is increasing through no effort of their own, 80% of people are parents. This means that most older Australians have children and grandchildren who may be struggling to buy a home – and perhaps especially to buy a home near grandma and grandpa.

Of course, eventually those children and grandchildren will inherit the wealth that...

September 25, 2017

Sometimes people really do win the lottery. But here is a story of someone who won the lottery twice.

We recently came across a genuine good news story. A woman just approaching aged pension age won a substantial amount in a national lottery. She needed the money! Before the win, she was living on the disability support pension and had no personal assets other than her car. She was renting her home, and spending the rest of her life on the pension was what she was expecting.

And then her lucky numbers came up. Happily, following a friend’s recommendation, this lady went to see her adviser. As it turns out, this was like winning the lottery for a second time!

The lucky winner had hatched a plan: she was going to use $300,000 to buy what is, in fact, her first home. This would then leave her with about $450,000 in cash. As she had never owned a home, she thought $300,000 was a lot to spend – and it would buy her quite a lot of house in the town in which she lives.

This was not a bad plan. Bu...

September 18, 2017

Marriage automatically revokes a will, unless the will specifically contemplates the marriage and names the intended spouse. So, if you are contemplating a marriage, or you have had a marriage and have a will that pre-dates that marriage, you need to get yourself a new will.

Wills for a second (or subsequent) marriage are typically more complex than wills for clients who are in or are contemplating or still in their first marriage. This is due to things such as the presence of children from previous relationships. These children often need to be catered for separately to any children of the current marriage (or relationship).

In a first marriage, where mum and dad have children together, the wills are typically the same for each parent: if they die, everything goes to their spouse. If they both die, everything goes to ‘their kids.’ In the case of each parent, ‘their kids’ means the same people – because the parents have kids together. In cases like this, it does not really matter which p...

September 4, 2017

Superannuation is an area that is often forgotten or misunderstood in the estate planning process.

A super fund member cannot just sign a will and assume that their super benefits will automatically be paid in the way set out in their will. The super fund trustees are not bound by the deceased member’s will and may pay the benefits to either the deceased member’s estate or to appropriate dependants as they see fit.

In most cases problems will not arise. But problems can arise, for example, in same sex relationships, with “hidden” or multiple relationships, with “warring” children, and so on.

Moral and legal factors which may influence a super trustee’s discretion to pay a benefit to a person include:

  • the relationship between that person and the deceased member;

  • the person’s age and ability to look after themselves financially;

  • the extent of the person’s dependency;

  • the person’s financial circumstances;

  • the history of the person’s relationship with the deceased membe...

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