With great power…

We all know about responsibility. We also know that one of the most common barriers to entry into the world of SMSF’s is the perceived burden of taking on the trusteeship of a large, and incredibly important asset. For some, having to organise annual administration, audit and investment review can be too much and passing these responsibilities onto a large Fund Manager is a more attractive option.

This is where the right team of advisors is crucial. Unless you have been bitten by a legislative spider or been exposed to stray SMSF radiation, you will need help. Tapping into the pool of knowledge held by your accountant and financial advisor can be the difference between a successful retirement plan and one that is simply limping along year to year with no real improvement. These advisors are there to help. The facets of your SMSF that seem impossibly boring and incomprehensively banal to you, are probably the things that keep your accountant awake at night.

Keeping a regular dialogue with your accountant and ensuring that they have a relationship with your financial advisor encourages the flow of information that will help you stay on top of your SMSF. Far too often we see the 18 month lag between event and administration. Things that may have happened in your SMSF in July 2013 may not be discussed and reviewed by your accountant until they are preparing the annual accounts in December 2014, inhibiting your ability to implement effective tax or investment strategies.

However, all is not lost. Your Friendly-Neighbourhood-Accountants are helping many trustees to have up to date information about their retirement savings in their hands quarterly or even monthly. With online data feeds and cloud based technology, we are able to process the activity of a Fund almost day to day. When you combine this with the capacity to log in to our SMSF software from your smart phone, checking up on your Fund will be almost as easy as checking your bank account or credit card balance.

Spiderman references aside, things are moving fast in the Superannuation team here at CNS Partners. It has now been 12 months since the launch of CNS Financial Solutions, and we have found that having a Fund’s financial advisor and administrator in same building can be exceptionally beneficial for all parties. We are trialling the technologies mentioned above as we speak and we hope that they will help to increase the involvement and interest of clients in the day to day running of their Fund. It is unlikely that anyone will ever be as thrilled about SMSF’s as us, but we are accountants after all and we are resigned to our fate.

To insure or not to insure?

We all hate paying for insurance cover, regardless of whether it is car, home, health, life or any other of the many aspects of our lives we feel the need to protect. Everyone would rather put the money paid in premiums towards nicer holidays or other luxuries. However, when the car is in an accident we are greatly relieved that the insurer will cover the repair cost. Paying to cover the ‘what ifs’ is considered by most of us to be a necessary evil, for some of us it is ‘a good idea but I can’t afford it’ and for others it simply ‘won’t happen to me’. It can also be a conversation too confronting to have, discussing the potential of injury or death, so it just gets ignored. Let’s consider some of the above points:

    – It won’t happen to me! One third of women and one quarter of men will suffer from cancer and one third of deaths in Australia are from heart disease. Someone in Australia suffers a stroke approximately once every ten minutes and over 60% of Australians will be disabled for more than one month during their working lives.

– I can’t bear to discuss it! 20% of Australian families will have a parent die unexpectedly, or suffer severe accident or illness. It needs to be discussed, because it may happen.

– I can’t afford it! Only 5% of Australians are considered to have ‘adequate cover’. While this is clearly a subjective statistic, the question must be, can you afford no to? What if something does happen? Can you make ends meet if it does? Some level of cover is better than none. Have you considered what your super fund offers?

For those that have accepted the need for insurance, the big dilemma then is ‘what do I need, how much cover is suitable and what is the right product for me? Not long ago we had millions of dollars of damage done by floodwaters and unfortunately the homeowners only found out when it was too late that their policy was inappropriate. That is not a discovery anyone wants to make, especially on top of the stress caused by the original event.

How many of us actually understand what cover we have and why? Do you know what TPD means, the difference between stepped and level cover, whether to hold life insurance inside or outside super, what trauma cover is, whether you are under or over insured? There are many confusing options and terminology and many of us have taken the advice of our broker blindly without asking too many questions. This does not make a lot of sense considering the stakes involved.

Two important questions:

– If the unthinkable happens, what am I actually covered for and will it suit my circumstances?
– If I agree to allocate a significant portion of my disposable income towards insurance cover, am I getting the best value for money possible?

If you do not have accurate answers to those questions, you need to get good advice from someone you can trust, someone who will consider your needs above what commission they can receive.

What is an Executor?

What is an ‘executor’ and what do they do?

An executor is a person appointed in someone’s Will to manage their affairs and carry out their wishes after they die.

An executor’s duties include:
1. arranging the funeral;
2. locating the Will and identifying all of the beneficiaries;
3. applying to the court for a grant of probate, if that is necessary;
4. collecting all of the estate assets and paying any debts;
5. arranging for tax returns to be prepared and lodged;
6. distributing the estate in accordance with the Will;
7. bringing and defending any legal proceedings on behalf of the estate; and
8. managing the inheritance of any beneficiaries who are under 18, if they are appointed to do so.

The role of executor is very important and therefore it is important to choose the right person or people.

You should choose someone who is trustworthy, reliable and organised. You should also discuss your choice with the person you would like to appoint beforehand, to make sure they are willing to take on the role, as it can be time consuming and demanding.
You should also consider whether there is any likelihood of conflict or disputes arising in relation to your estate after you die. If a dispute does arise, your executor will play a very important role in managing and dealing with that, including representing your estate in court proceedings if that becomes necessary. Particularly, you should avoid appointing an executor who you think might challenge your Will, as this will place them in a position of conflict.

Up to four people can act jointly as your executor. If you appoint more than four people in your Will, only the first four named people will be the executors. Your executor can be any person who is over 18 . Many people choose family members or friends.
You can also appoint a professional person to be your executor, such as a lawyer or accountant. People often choose this option where they have no trusted family member or friend who they can appoint, their estate is very complex or there is a high likelihood of a dispute after they die.

If you die without a Will or the executors nominated in your Will cannot or do not wish to carry out the role, other people who are interested in the administration of the estate can apply to the court for ‘letters of administration’. If there is no other suitable person to appoint, the court will appoint the Public Trustee of Queensland. The person who is appointed is then your ‘administrator’.

Article by Hannah Kulaga

Contact the Cooper Grace Ward Estate planning Team: 07 3231 2444

The Death of Desktop

The death of a desktop
Anyone who experienced life before the 1980s will remember a time when home and office appliances were built to last. Lifetime guarantees were the norm and the Hoover vacuum cleaner literally outlived the grandparents. The same can’t be said for the desktop computer of today. Planning ahead for its relatively short lifespan is crucial for good business.

While the physical body of a desktop computer might last for decades, its use and function as a business computer is between 3 to 5 years, depending on what it’s used for. Choosing to keep business computers for over this length of time comes with a whole set of risks and problems.

Slow computer
Computers over 3 years old will quite simply be slower. Coping with the onslaught of continuing upgrades and updates will have it moving at a crawl. This is no good for productivity, not to mention the sanity of the user. The alternative is to run old software and ignore the updates but this comes with its own risk. Without the latest upgrades to software, computer performance will not be at its optimum. More importantly, it remains exposed to new security flaws that the upgrades remedy. Without support, your business computers are sitting ducks for security breaches.

Support comes and goes
Most software is bought with some degree of IT support. Microsoft in particular provides support for all their operating systems. This includes access to continuing improvements and protection from emerging security threats, but the support is finite. Eventually the time comes when it is removed and systems are left to fend for themselves. Microsoft only just recently removed support for their operating system Windows XP. In response, most of us upgraded to Windows 7 to minimise security risks and IT costs. The thing to realise is that Windows 7, just like XP, will eventually be retired too. Moving on before the support is retired is often a wise and potentially dollar saving move.

Computer crash
The worst-case scenario when keeping a desktop for longer than 3 to 5 years is that the computer will potentially start to crash. We can all imagine the nightmare unfolding if our business computers crashed. It’s a scenario to be avoided. It needs to be accepted that the life span of a business computer is no more than 3 to 5 years. Trying to extend its lifespan is inviting trouble.

While 3 to 5 years seems a short time, it needs to be viewed through the lens of technology in general. The fast pace of changing and improving technology suggests that in 3 to 5 years anything might be possible. Desktops may no longer even exist — we might wear them as a wristwatch or implant them inside our heads! But before we get ahead of ourselves, right now 3 to 5 years is a pretty good deal in technological terms. If your business computers are approaching their use by date, embrace the joy of a brand new hard drive and avoid the potential pitfalls of an aging business computer.

For a high level assessment of your IT network, which will identify areas of risk or areas lacking, use our Network Self-Assessment tool. It’s quick and easy and will reveal areas for improvement in your business.

Contact the Grassroots IT Team: 1300 554 138

Hybrid Securities – the best of both worlds?

For those unfamiliar with the term, preference shares (otherwise dubbed Hybrids) are listed investments that have both ‘debt’ and ‘equity’ characteristics. Companies sell/issue hybrids on the Australian Stock Exchange as a way of raising capital without diluting the value of ordinary shareholdings. Whilst every offering is different and have their own individual contracts, they are effectively an interest only loan to the issuing company, where as an investor/lender, you are expected to receive:

– Predetermined distributions (interest payments for the loan), and
– Repayment of the original listing price at maturity (commonly in cash or ordinary shares).

Similar to a loan, the payment (interest) rate is determined based on the likelihood of the company defaulting. Therefore, companies with high credit ratings (e.g. Commonwealth Bank’s AA- rating) may pay a lower distribution but in turn has a very low risk of defaulting. If used correctly, hybrids can provide the investor with equity like income without the volatility. The below chart shows the price movement of Crown Resorts (CWN) compared to their Hybrid Subordinated Debt (CWNHA) over the last 12 months:

Whilst CWNHA did not receive the growth of the issuers stock, it provided a gross income return of approximately 7% and much greater capital stability, holding its value following an initial dip in CWN stock price. This is significant give an RBA cash rate of 2.50-2.75% over this period.

The key risk of hybrid securities is that the issuing company is unable to repay the debt at the end of the agreed term. Because of this, many hybrids suffered losses during the GFC as investors sold their holdings to avoid the risk of default and this drove down the price. High quality hybrid offerings did however continue to pay the predetermined distributions throughout this period and have since recovered in price and are currently trading around their original issue price.

Hybrids can benefit an investor by providing an increased level of income (which may include franking credits) for superannuation, pension or personal portfolios without the inherent volatility direct share investments would expect over time. Depending on the investor’s attitude towards risk, hybrids can be a great alternative to cash and fixed interest investments.

Wilson HTM provides dedicated hybrid research and can assist you in reviewing whether hybrids may be appropriate to your personal situation and investment strategy. If you would like to discuss hybrids or any other investment matters further, please feel free to contact Ben Davis at Wilson HTM.

Ben Davis, Wilson HTM Investment Group: 07 3212 1038

Disclaimer. Whilst Wilson HTM Ltd believes the information contained in this communication is based on reliable information, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. To the extent permitted by law Wilson HTM Ltd disclaims all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage) however caused, which may be suffered or arise directly or indirectly in respect of such information.
The advice contained in this document is general advice. It has been prepared without taking account of any person’s objectives, financial situation or needs and because of that, any person should, before acting on the advice, consider the appropriateness of the advice, having regard to the client’s objectives, financial situation and needs. Those acting upon such information without first consulting one of Wilson HTM Ltd investment advisors do so entirely at their own risk. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever. If the advice relates to the acquisition, or possible acquisition, of a particular financial product the client should obtain a Product Disclosure Statement relating to the product and consider the Statement before making any decision about whether to acquire the product. This communication is not to be disclosed in whole or part or used by any other party without Wilson HTM Ltd’s prior written consent.

Superannuation for Employers

Understanding what is required for employers to meet their superannuation obligations can be a challenge for many small business operators. The aim of this article is to provide the basics.

Superannuation Basics

You must make super contributions for an employee if you’re considered an employer for super guarantee purposes and your employee is entitled to the super guarantee. You’re an employer for super guarantee purposes if you employ a person under a verbal or written employment contract on a full-time, part-time or casual basis.

Generally, you have to pay super for an employee if they’re 18 years or over and you pay them $450 or more (before tax) in salary or wages in a month. It doesn’t matter whether the employee is full time, part time or casual. Employees who are under 18 years old must meet the above conditions and work at least 30 hours per week to be entitled to super guarantee. The superannuation guarantee eligibility decision tool can be a great way to test whether you are meeting your obligations
(Superannuation guarantee eligibility decision tool).

You also have to pay super for contractors if the contract is wholly or principally for their labour, and for employees who are temporary residents of Australia. If you’re a sole trader or partner in a partnership you don’t have to pay super for yourself, but you can make super contributions as a way of saving for your retirement. Note that if you employee yourself through your company or trust you must pay yourself super in line with the superannuation rules.

Currently, you must pay a minimum of 9.25% of each eligible employee’s ordinary time earnings each quarter in super. From 1 July 2014, the rate will increase to 9.50%. Ordinary time earnings (OTE) is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift-loadings and allowances, but doesn’t include overtime payments.
Super is calculated quarterly – that is, every three months. For each of your employees:

– multiply their ordinary time earnings for the quarter by 9.25%
– pay this amount to a complying super fund or retirement savings account by the quarterly cut-off date.

If you back-pay salary or wages to a former employee you have to pay super contributions on that back pay.

You have to pay super guarantee contributions for each eligible employee at least four times a year. Payments must be made by the quarterly cut-off dates:

If you require any further information on keeping up with your superannuation obligations please contact the team at CNS Partners.

Rental Properties – Deduction Breakdown

As many clients now have some type of investment in the property market, it is important to know and understand what you are entitled to claim in relation to expenses incurred.

The general rule of thumb is that you can claim an expense that relates to you gaining or producing assessable income. As monies received from rental income is assessable to an entity, expenses incurred in relation to that income can be deductible and categorised into three areas; non-deductible, immediately deductible and deductible over a period of time.

Non-Deductible
You are not entitled to claim deductions for acquisition and disposal costs related to the property (these are dealt with when you sell), expenses not actually incurred by you (i.e. expenses paid by the tenant) and expenses not related to the renting of a property (i.e. expenses connected to your own use of a holiday home that you rent out for part of the year).

Immediately Deductible
Expenses for which you may be entitled to an immediate deduction in the income year you incur the expense include those re-occurring expenses such as body corporate fees, council rates, electricity and gas, insurance, interest on loans, land tax, property agent fees and commissions and water charges.

Those occasional one off expenses such as advertising for tenants, cleaning, gardening/lawn maintenance, pest control, repairs and maintenance, stationery and postage and travel also entitle you to an immediate deduction.

These are the most common expenses landlords incur. Remembering that you can only claim the deduction if you paid for it out of your own pocket. If they are paid by your tenant, you do not get any deduction for the expenses.

Some of these generic deductions listed require further analysis for each particular circumstance. If you feel you have incurred some of these expenses in relation to your rental property, let someone at CNS Partners know and we will be sure to claim what deductions you are specifically entitled to for a particular year.

Deductible over time
There are three types of expenses a landlord may incur for a rental property that may be claimed over a number of income years; borrowing expenses, decline in value of depreciation assets and capital works deductions.

Borrowing Expenses are those expenses incurred directly in taking out a loan for the property. Most commonly they include; loan establishment fees, title search fees and preparation fees. If the fees equate to more than $100, they are apportioned and deducted over the lessor of a five year period or the period of the loan.

In relation to any decline in value to deprecating assets, it is important that you keep all your necessary receipts for rental expenses as not only do we need the purchase price, but also the date of purchase for any deprecating assets. These assets are then written off over their useful lives.

Capital works deductions are based on construction expenditure and as such apply to; a building or extension (e.g. adding a room, garage, patio or pergola), alterations (e.g. removing/adding an internal wall) and structural improvements (e.g. adding a gazebo, carport, sealed driveway, retaining wall or fence). To seek any specific information on possible capital works deductions, feel free to contact anyone here at CNS Partners to give you a helping hand.

Claim your Lost Super

According to recent reports, there are approximately 3.4 million ‘lost super accounts’ in Australia that have a combined worth of almost $17 billion. Billion with a B!

If you have changed your address, job, or even your name it is possible that you will have multiple superannuation accounts. Sunsuper general manager of customer experience Teifi Whatley says that most Australians have at least 3 super accounts.
Consolidation is the key with regards to superfluous accounts. Having your super spread across several funds means that you are likely compounding the effect of any fixed fees. Besides the monetary disadvantages, it is also much easier to keep track of your retirement savings when they are in one account.

So what can you do to reclaim any superannuation funds that you may have lost contact with over the course of your career?

Step 1:
Visit the ATO website and use their SuperSeeker to tool to search for lost accounts.
https://www.ato.gov.au/calculators-and-tools/superseeker/ 
Being the forward-thinking and up-to-date department that it is, the ATO has also developed a SuperSeeker app that can be found the App Store.

Step 2:
Contact your previous employers to find more information regarding your former super funds. Once located, you will be able to consolidate these with your current accounts.

Step 3:
If you are able to recall which fund you may have an account with, you can use the government’s Super Fund Lookup tool to find the details of the fund. Most funds will be happy to help you locate any funds held with them.
http://superfundlookup.gov.au/ 

Step 4:
Once you have recovered your lost super, you are able to make decisions regarding where to invest to best provide benefits for your retirement. If you require guidance with this, the financial planning team at CNS Financial Solutions would be happy to arrange a meeting and discuss industry, retail, and Self-Managed Super Funds.

Which assets can my Will deal with?

People are often surprised to learn that their Will cannot deal with all of the assets that they manage or control when they die.

Generally, a Will can only deal with and give away assets in your own name, such as your home, shares and cash in bank accounts.

It cannot deal with any assets held jointly, such as property held as joint tenants or money in joint bank accounts, because these assets will pass to the other owners automatically when you die. Usually, assets that you control through a company or a trust also cannot be dealt with under your Will. However, in some circumstances and with additional planning, you can pass control of these structures through your Will.

Superannuation is not a personal asset, but it can form part of your estate if it is paid to your estate by your trustee after you die. It is the trustee of your superannuation fund who decides who will receive your superannuation. It will not automatically go to the person you wish and a direction in your Will as to who it should be paid to may not be effective. However, in some circumstances, you can make sure that it is paid to the people you choose by using other estate planning tools.

It is also important to be aware that any assets that your Will can deal with are vulnerable to estate challenges. On the other hand, assets outside of your estate will not be.

Anyone with assets in New South Wales should also be aware that there are special ‘notional estate’ provisions that can lead to assets that do not usually form part of a deceased person’s estate being available to make an award in an estate challenge.

It is important have a full estate plan in place that deals with all of the assets you control, instead of only writing a Will. This is the only way to make sure that you properly pass control of any assets that your Will cannot deal with and protect assets as far as possible from the risk of estate challenges when you die.

For more information or advice about your estate planning, contact our estate planning team today.

Work-Related Clothing

Most taxpayers want to claim as many deductions as they can in order to pay as little tax as possible. While it is most important to ensure that you are entitled to the specific deduction, what many do not realise is that you can claim a deduction for a work uniform, either compulsory or non-compulsory, that is unique and distinctive to the organisation you work for.

To be a unique and distinctive piece of clothing, the items must have been designed and made only for the employers use, often with the company logo permanently attached and not available to the public. This means that for employees wearing a ‘plain uniform’, the costs of purchasing the items of clothing and costs incurred in cleaning the garments are non-deductible.

In the eyes of the ATO, a compulsory work uniform is a set of clothing that identifies you as an employee of an organisation with a strictly enforced policy that makes it compulsory for you to wear the uniform while you are at work.

Where your uniform is compulsory, you may be entitled to claim a deduction for shoes, socks and stockings where they are an essential part of a distinctive compulsory uniform and where their characteristics (i.e. style, type, colour etc.) are specified in your employer’s uniform policy. Further items such as a jumper can be claimable if it is compulsory for you to wear it at work.

Where your uniform is non-compulsory, you are unable to claim expenses incurred for the clothing unless your employer has registered the design with AusIndustry. Where you purchase everyday items such as shoes, socks, stockings and jumpers, these items can never form part of a non-compulsory work uniform and a deduction cannot be claimed.

Further to a uniform, items of protective clothing that you wear to protect yourself from injury or illness in your field of work are deductible. These items often include;
– Fire-resistant and sun-protective clothing
– Safety-coloured vests
– Steel-capped boots, hard hats, gloves, overalls and heavy duty shirts/trousers

Ordinary clothing such as jeans, drill shirts, shorts, trousers, socks and closed in shoes are not deemed protective and cannot be claimed as a deduction.

Where your items of clothing are eligible work clothes, you can further claim the ongoing costs of washing and dry cleaning the items. Where the costs of these expenses exceeds $150, written evidence is required to substantiate your claim. Where your claim is less than $150, the ATO sets a reasonable basis for your claim to be worked out. If you think you are eligible to claim any deductions for work related clothing items, remember to keep those receipts and send them in with your tax papers and the staff here at CNS Partners will ensure the deduction is claimed if you are entitled to it.