GPL Financial Group GPL Partners

August 2018

ATO issues alert on super, tax scams

Beware identify theft scams.

       

 

The ATO expects to see another spike in scams this tax time, including those that aim to obtain personal data in order to access bank accounts and superannuation.

ATO assistant commissioner Kath Anderson said last year more than 37,000 scam attempts were reported to the ATO during tax time.

“While many people were alert and didn’t fall for the scams, hundreds handed over a total of more than $630,000 and thousands handed over their personal details,” said Ms Anderson.

Ms Anderson said organised crime groups use a range of tactics to trick taxpayers that include asking them to click on a link to divulge their login, personal or financial information or to download a file or open an attachment which enables them to access data.

“Once they have your data, they can either sell it or use it to impersonate you for financial gain,” she said.

“Besides selling it to organised crime groups, identity thieves can use your data to do things like getting a loan or commit fraud in your name, access your bank account and shop using your credit card, access your myGov account, steal your superannuation or sell your house.”

While the most common scam continues to be the ‘fake tax debt’ phone scam, she said, the ATO is seeing an increase in fake refund or refund-for-a-fee scams, and email and SMS scams enticing people to click a hyperlink, download a file or open an attachment.

“While handing over money is a concern, we are just as concerned about people handing over personal or financial information,” she said.

 

Miranda Brownlee
19 July 2018
www.smsfadviser.com

 

Estate planning in the new environment

The introduction of the transfer balance cap (TBC) on 1 July 2017 has had a severe impact on estate plans that include superannuation savings. 

         

 

Whereas it was previously possible that significantly greater amounts could be retained in the super system after death or disability (and SMSFs could be used as family “dynasty” vehicles), an important aspect of the purpose of the reforms to the law was to reduce “the extent that superannuation is used for tax minimisation and estate planning purposes” (see Treasurer Scott Morrison’s media release dated 3 May 2016).

What changed?

Among numerous changes, perhaps the most significant element of the reforms was that a cap of $1.6 million for the total amount of an individual’s super savings that could be transferred into the tax-free retirement phase. Although this measure immediately impacts on the retirement plans of individuals during their lifetime, it will also impact on the estate plans of individuals who have total super balances that exceed $1.6 million at the time of their death (whether in retirement or accumulation phase), or whose beneficiaries do (whether in their own right, or in combination with their inheritance).

Super death benefits may be paid as: a single lump sum, an interim and then a final lump sum, one or more retirement phase pensions, or combinations of all of the above. It’s a common wish of individuals that their super pension be paid to their beneficiaries in the same form after their death, for reasons such as asset protection and tax. Of course, this is only possible where it’s permitted and in accordance with the relevant trust deed, pension document and death benefit nomination. Importantly the recipient of such a pension must be a tax law dependant of the deceased.

What’s the problem?

Where these conditions have been satisfied, the maximum death benefit that can be retained by the new pensioner (whether as a reversionary or new pension) will be equivalent to their general TBC (which will ordinarily be $1.6 million). However, this outcome assumes that the new pensioner has no other retirement phase pension interests when they receive the death benefits. Where they do have other such interests, then they will already have an amount standing to the credit of their transfer balance account equivalent to the value of the assets supporting those interests (as at the previous 30 June). The consequence is that any additional amounts transferred to the retirement phase for that individual (in any super fund) must not result in their TBC being exceeded. Such excess transfers may result in the imposition of penalty taxes and interest, where they aren’t rectified within certain periods.

Is there a fix?

Fortunately, the reforms allow such rectification to occur within a period of up to one year from the date of death, but only where the new pensioner receives a reversionary pension. In addition, the existing law also permits the trustee of a super fund to pay a death benefit (without jeopardising its status as a death benefit) within a “reasonably practicable” period. As a result, there is an obvious opportunity for the new pensioner to re-arrange their affairs in anticipation of receiving the death benefit (or even after they’ve received it), in order to ensure that they don’t exceed their TBC. In particular, this action involves the new pensioner reducing their credit value of their TBA to nil (in cases where they have not yet received the death benefit) or to $1.6 million (in cases where they have). As a result, it is possible to ensure that an additional amount of up to $1.6 million is retained in the super system.

Of course, employing the above strategy has potential tax benefits. This means it is always possible that commissioner of taxation could successfully strike it down under the general anti-avoidance provisions of the income tax laws. Notably, such an outcome may not ensue, where the taxpayer’s purpose for entering into the strategy was predominantly for some other reason. It is the author’s experience the majority of individuals who seek to employ such arrangements do so because of family dynamics that are peculiar to them (for example because super death benefits were earmarked to be received by a particular family member), or for asset protection reasons.

What should I do?

Ultimately this aspect of the reforms means many individuals will need to revisit their estate plans to take into account how their situation may now have changed. A common perception is that this measure will not affect many individuals as the current balance of their super savings (or those of their beneficiaries) doesn’t exceed or near $1.6 million and is unlikely to do so. Unfortunately this analysis ignores the possibility of growth in those savings over many years and, very importantly, the fact most super interests include life insurance policies, the payment value of which will frequently cause balances to exceed or be around this threshold.

 

Chris Balalovski
​Partner, business services at BDO Australia.
July 25, 2018
smsmagazine.com.au

The good, bad, and potentially ugly for SMSFs

“Two hundred thousand dollars is a lot of money. We're gonna have to earn it”  Clint Eastwood said as Blondie in The Good, the Bad and the Ugly, on the work a gang of three were going to have to do to find a hidden fortune.

         

 

The recently released 2018 Vanguard/Investment Trends SMSF report offers insights into the hard work the nearly 600,000 Australian self-managed super funds are putting into growing their retirement savings.

The sector has grown rapidly over the past ten years and while growth in the number of new SMSFs being set up each year has slowed, it remains the largest sector of the superannuation asset pool representing just over 30 per cent of overall superannuation assets in Australia.

Two in five SMSFS now have balances of over $1 million, and the report offers an annual update on how trustees are managing this money, and what their issues and concerns are.

This year there were three notable themes running through the findings – impacts of regulatory change, the demand for advice, and portfolio construction challenges.

Regulatory change

Far from the lawlessness depicted in the spaghetti westerns of the sixties, trustees are operating in an increasingly complex regulatory environment.

Impacts of this regulatory change played out in this year’s findings, in particular due to several new rules coming into effect in July 2017.

Portfolio structures are being impacted by the federal government’s introduction of the $1.6 million cap for pension accounts and these changes are seeing SMSFs having to review their portfolios and potentially maintaining assets in the accumulation phase or increasingly looking to invest outside of their fund to address both the risk of exceeding caps and the regulatory uncertainty.

Clearly ‘concerns about regulatory change’ was the biggest challenge cited by trustees in managing their fund this year.

This is likely to become a greater issue in the short to medium term for SMSF trustees with the ongoing Royal Commission into financial services and Productivity Commission’s draft report into superannuation both likely to have considerable impact on the federal government’s policy agenda.

Advice

SMSFs who currently work with an adviser are increasingly saying they value their relationship with satisfaction scores on the up. This year 86 per cent of SMSFs rated their adviser good or very good.

Each year, this research highlights areas of advice which SMSFs would like to be able to access but currently are not – these are labelled ‘unmet’ advice needs.

In 2018 almost half of the respondents said they have unmet advice needs – notably in the areas of inheritance and estate planning, tax planning and investment selection.

A major barrier for trustees in seeking advice is the growing belief that costs are too high. 

The opportunity embedded within these results is how advisers can better demonstrate their value and justify the investment in advice, in addition to meeting some of the specific technical needs of this sector.

Managing the money

Many fund trustees operate with more sophisticated investment knowledge than they are perhaps given credit for, and by virtue of running an SMSF, they are more engaged than most with their own financial security.

However it shouldn’t be taken for granted that the industry’s interpretation of what constitutes a well put together investment portfolio is the same as the investing publics’.

For the first time this year the survey asked specific questions about both the level of diversification and the understanding of the concept among trustees, with a common concern over the years being that many SMSFs carry higher risk in their portfolios due to a concentration of funds in individual Australian shares and cash.

The survey asked trustees whether they agreed it was important for an SMSF to be well diversified and 82 per cent either agreed or strongly agreed. However, when asked how well diversified their SMSF portfolio is only 54 per cent responded that it was either well or very well diversified.

Digging a little deeper into what trustees considered to be a well-diversified investment portfolio, almost two-thirds thought a portfolio of 20 shares got the job done.

Given that the average SMSF has about 17 shares in their portfolio according to Investment Trends, that answer should not be surprising as it recognises the reality a lot of trustees seem comfortable with.

However, a 20-share-portfolio fails professional tests of diversification and would be classified as a relatively high risk portfolio given, in particular, the concentration of the Australian share market in resource companies and banks.

What was encouraging however from this year's trustee survey was a recovering interest in managed funds and a greater appetite for investing overseas, both of which go towards mitigating some of the risk from the lack of diversification.

A key question that remains for retired trustees is whether they have the appropriate level of diversification and risk protection built into a portfolio now in pension mode, because the impact of unexpected downturns in the domestic economy could be far more dramatic for those with a shorter investing timeframe and without the ability to replenish capital from employment.

 

This article first appeared in the Australian Financial Review on Tuesday, 3 July

Robin Bowerman
Head of Corporate Affairs at Vanguard Australia
09 July 2018
www.vanguardinvestments.com.au

SMSFs lose thousands in property, investment scams

SMSFs have been targeted by various property and investment scams this year, with hundreds of thousands of dollars already lost, warns the Australian Competition and Consumer Commission (ACCC).

         

 

This week the Australian Competition and Consumer Commission (ACCC) released statistics indicating that $26 million had been reported lost to investment scams in 2018 so far. This accounts for 84 per cent of the total losses recorded in the same period for 2017.

Speaking to SMSF Adviser, ACCC Deputy Chair Delia Rickard confirmed that at least 15 of the reports made to the ACCC in 2018 have involved SMSFs. However, she said SMSFs likely represent a far greater percentage of the total 1796 reports made, given the reporting form does not ask information about whether losses relate to an SMSF.

“We were given 15 reports that did reference SMSFs and from those 15 reports, ten of them involved losses of $810,000. However, I suspect that an awful lot of the total investment scams [reported] involved SMSFs,” said Ms Rickard.

The 15 reports that made reference to SMSFs involved scams related to property and shares, she said.

Ms Rickard said scams have been on the rise this year with the amount of money lost on an average month-on-month basis increasing 117 per cent compared to last year.

“Last year, Australians reported they lost $64.6 million to investment scams to Scamwatch and the Australian Cybercrime Online Reporting Network (ACORN). If the current trend continues, combined losses reported to Scamwatch and ACORN in 2018 could be in excess of $100 million,” she said.

“These scams are very sophisticated and the scammers are very convincing. People aged 45–64 are most at risk and make up more than half the reports sent to Scamwatch.”

The vast majority of investment scams, Ms Rickard warned, are still centred on traditional investment markets like stocks, real estate or commodities.

“For example, scammers will cold call victims claiming to be a stock broker or investment portfolio manager and offer a hot tip or inside information on a stock or asset that is supposedly about to go up significantly in value. They will claim what they are offering is low-risk and will provide quick and high returns,” she said.

“Scammers will spend significant time and effort grooming their victims to invest. They will use the right technical language and also offer professional looking websites and documents to convince victims they are legitimate.”

Cryptocurrency trading is one area where scams have grown significantly in the past 12 months, she said, and is now the second most common type of investment scam offer pushed on victims.

“The rise in popularity in cryptocurrency trading has not been missed by scammers who are latching onto this new trend to con people,” she said.

Binary options trading is another area where scams are prevalent, she said.

“This involves scammers pretending they can predict the movements of a commodity, asset or index prices over a short time. They direct you to a website with a login, account details and a trading platform,” she explained.

“They appear to put your money into the account and demonstrate a number of successful trades to encourage you to invest greater sums. Then your money begins to disappear and so too does the scammer.”

Ms Rickard said SMSF accountants and advisers can help SMSF investors to avoid scams by reminding clients to ignore calls and emails they receive out of the blue that promote new investment opportunities.

“Any claims like 'risk-free investment', ‘low risk, high return’, 'be a millionaire in three years', or 'get-rich quick' are also easy tells that you’re dealing with a scammer,” she said.

 

Miranda Brownlee
24 July 2018
www.smsfadviser.com

Statistics show SMSFs not just for the rich

The latest data reflecting the current position of the SMSF market has indicated these types of retirement saving structure are not purely the domain of extremely wealthy individuals as is often thought, the SMSF Association has said.

       

 

The most recent figures pertaining to the sector reveal there are currently 592,658 SMSFs servicing 1.12 million members. The average assets per member stand at $599,265, with the average assets per fund being $1.12 million.

However, the median statistics reflect a slightly different picture, with the median assets per member standing at $362,280 and the median assets per SMSF currently coming in at $641,983.

When examining the data to glean a more accurate assessment of the sector, SMSF Association head of policy Jordan George said more consideration needs to be given to the median statistics over industry averages.

“I think often when we talk about SMSFs the median figures actually are a bit more instructive because those average figures tend to get distorted a bit by some very large funds we do have in the SMSF sector,” George noted.

“So I think [the median statistic] is an important figure to look at when we’re having debates around SMSFs being superannuation vehicles just for the very wealthy or the very high income earners.

“The important statistics are those median figures and they do show [there is] around $360,000 per member or $640,000 per SMSF, [and this does not indicate they are] a vehicle for very high net worth people and a lot of our SMSF members who would be in retirement phase would potentially be relying on a part pension to supplement their SMSF income.”

With regard to the make-up of SMSF members, gleaned from the 2016 income year, George indicated there was significance in how many were close to retirement.

“There is a very significant number of members aged from 55 to 69. What we’re looking at there is over the next 15 to 20 years there is a significant proportion of SMSF members, just over 40 per cent, who are in retirement phase already or will be moving into retirement phase,” he said.

“That shows that the sector is ageing in terms of its demographic and it’s an important consideration for advisers to remember that the sector is going to have a far greater focus on retirement income over the next 10 to 20 years and we need to think about the challenges that come with that.”

 

Darin Tyson-Chan
July 24, 2018
smsmagazine.com.au

 

 

Tools for budgeting, cash flow, Super and more ….

Better financial management and improved financial literacy will help attainment your long-term goal.  The resources in our Financial Tools will help.  Available 24/7.

Don't ever do a Budget again on the back of an envelope or using anything hand written. Via this site's financial tools, secure client portal or calculators you and your family can access very good online resources AND all information is kept for re-use over and over again. Do the hack work once online and you only have to adjust data from then on. Great for your kids as well.

These tools are an added service to help you, our clients, gain more from what we provide.

       

 

You may think that working on a Budget or cash flow isn’t your cup of tea but when things are tight or you need to look long term there is no better way to manage how your money is used. 24/7 access and if you have a question you don't have far to go to ask.

The following images are examples of what can be done, also there is a longer article about overall financial literacy following the first few points.

Budget Cash Flow
 
Cash Flow Summary  

Super Super Optimiser

When you feel the urge then a quick trip to our website is a good thing to do, it has all the tools you need and more. Also any information you add that’s relevant to other tools is automatically transferred saving you time and effort.

Give it a go. Start with a Budget or cash flow analysis or Super scenario. It may take a bit of time but even a few minutes here and there is good and everything you add will be waiting until the next time you log in.

Your Financial Planner