Self-drive your super<Adviser’s Name>

<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd

Self-drive your super<Adviser’s Name>

<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd

<Adviser’s Name>

<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd

Self-drive your super

<Adviser’s Name>

<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd

My Name Financial

Self-drive your super

<Adviser’s Name>

<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd

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Self-drive your super

6

Disclaimer

Important Notice

RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number 238429 and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts.

The information presented in this seminar is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances.

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Agenda

• SMSF facts

• SMSF considerations

• Trustee obligations

• Our service solutions

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The self-drive revolution

Statistics indicate that a rapidly increasing number of Australians are taking up

this option...

• Over 30,000 new self managed super funds were launched in the year July 2012 – June 2013

• There are now over 500,000 self managed funds representing more than 960,000 individuals

• Self managed funds have over $540 billion in assets

According to average figures from the Australian Tax Office. 2014

Running your own fund means there is a lot to consider AND with greater freedom comes greater responsibility.

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What is a Self Managed Superannuation Fund?

The facts...• Up to 4 members

• All members are trustees

• If using a corporate trustee, all members must be directors of the corporate trustee

• No member can be an employee of another member unless they are related

• Can have ‘single member’ funds

• Regulated by the ATO

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Self Managed Super tends to suit…

People who:• Operate small or family businesses

• Like to have hands-on control over investment decisions

• Like to have their superannuation customised to play a key role in family wealth and estate planning

• Wish to invest in alternative assets

Why Self Managed?

SMSF considerations

RI Advice - Working with you to achieve your goals

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Complete investment control?

• Sole Purpose Test

• Restricted acquisitions from related parties

• In-house Asset Limits

• Business Real Property Exemption

• Derivatives only for risk management

• Arm’s length dealings

• Limited ability to borrow via a limited recourse loan

• Trustee covenants

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Related parties

• SMSFs are prohibited from acquiring most assets from a related party

• Related parties include:

– Members

– Standard employer of the fund

– ‘Associate of the member’

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In-house assets

In-house assets are:

• Investments in, loans to, and lease arrangements with related entities.

• Restricted to 5% of the value of the fund

But there are some exceptions...

• Listed shares

• ‘Widely held’ unit trusts (managed funds)

• Investments in pooled superannuation trusts

• Business real property

• Property owned by the super fund and a related party as tenants-in-common

• Deposits with authorised deposit-taking institutions (ADI) and approved non-ADI

• Life insurance policy issued by a life company (not acquired from a member or relative)

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NO

NO

POSSIBLE

NO

NO

YES

In-House Assets?

Smith Family Super Fund Assets:

• Macquarie CMT $ 15,000

• BHP shares $ 30,000

• Shares in Smith Pty Ltd $ 50,000

• Perpetual Aust Share Fund $ 50,000

• Shops 1-4, 52 Main St Adelaide $500,000

• Loan to Smith Pty Ltd $ 5,000

$650,000

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Borrowing to invest – pre 2007

• Prior to 2007 there were very few opportunities for funds to borrow directly.

• Indirect borrowing via trusts or companies was possible but there were a number of risks and limitations.

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From 2007 - The legislation now provides…

• The superannuation fund is permitted to borrow

• The loan must be applied to acquire an asset that the fund can ordinarily invest in

• The asset is held in trust for the superannuation fund

• The superannuation fund has a beneficial interest in the asset

• The superannuation fund must make one or more payments to acquire the asset

• If the superannuation fund defaults on the loan the lenders right to recoup is limited to the value of the asset.

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Borrowing to invest – Limited recourse loans

• A geared investment in a superannuation fund can be achieved via a structure known as a ‘limited recourse loan’

• A limited recourse loan can enable a fund to utilise borrowing to purchase a range of investments including direct property.

With the right advice and approach this can be a powerful way to boost your super and diversify your investment portfolio

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Borrowing to invest - A snapshot

• You can gear with your Superannuation Fund

• Borrowing can be for any investments as allowed by SIS

• Borrowing is limited to newly acquired assets (i.e. not for currently held assets)

• You can swap geared assets

• You can only do a limited recourse loan via a Debt Instalment Trust structure

• Lenders security is limited to the asset held in the debt trust

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Borrowing to invest

• There is no limit on the amount of the loan

• There is no restriction on who the fund can borrow from

• The loan must be on a limited-recourse basis

Remember, the SMSF is responsible for the loan repayments, so it is important to consider the fund’s

cashflow before entering into a borrowing arrangement.

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Borrowing to invest - Case Study

• Her SMSF has significant investments but she wishes to use $100,000 in the SMSF to purchase the property.

• The property can be purchased by using a limited recourse loan

Sandra wishes to purchase a property which is currently valued at $500,000

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Super Fund

Trust

Lender

• Commercial Property

• Security

• Bank

• Institution

$400,000

$100,000

$500,000

Assets

Cash $100,000

Shares $200,000

Property $500,000

Borrowing to invest- Let’s look at a limited recourse loan structure

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• Gearing investments via super including property, shares and exotics

• Those who have met the concessional and non-concessional contribution caps

• Negative gearing by lending to the fund at a premium rate

• Those who wish to put money in super but can’t contribute – over 65 who don’t meet work tests

• Younger members who wish to bring forward the purchase of investments via super

Borrowing to invest - Who can benefit most?

SMSF obligations

RI Advice - Working with you to achieve your goals

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Obligations? What obligations?

• Responsibilities of Trustees

• Investment Strategy

• Investment Selection

• Administration

• Compliance

– SIS Act

– ATO

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A Trustee must be appointed, either a

• corporate trustee, or

• all members must be trustees and vice versa.

Restrictions on who can be a trustee:

Cannot be:

• Minors (person under 18)

• Individuals under a legal disability (eg. has lost mental capacity)

• Bankrupts

• Anyone disqualified from being a company director

• Anyone convicted of fraud or dishonesty.

Trustees

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Trustee obligation - Administration

• Being acquainted with and carrying out the terms of the trust

• Ensuring that title of all fund assets is in the names of the trustees

• Accurate bookkeeping

• Annual lodging of tax return

• Annual audit

• Timely and efficient

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Trustee obligation - Compliance

• Act impartially in the interests of all beneficiaries

• Ensure that all vesting and preservation rules are adhered to

• Keep informed & up to date with any changes. Ignorance is no excuse

• Adhere to lodgement timelines & bureaucratic requirements

• Legislative requirements e.g. investment activities & maintenance of fund documentation.

• Severe penalties for becoming non-compliant

• SIS Act over-rides trust deed

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It must have regard to:

• The investment objectives

• Diversification

• Risk & return

• Liquidity (cash reserve)

• Ability to meet liabilities

• Asset allocation

• Insurance needs for members

Trustee obligation - Investment Strategy

Trustees must formulate, implement and regularly review their Investment Strategy. An Investment Strategy is a plan for making, holding and realising fund investments.

SMSF Obligations – Fund Establishment

Legal requirement UltimateResponsibility

Outsource Solutions available to you

Financial Adviser Accountant Administrator

Suitability of SMSF Structure

You

Develop Investment Strategy for the fund

You

Provide Strategic advice to members (E.g. contributions)

You

Obtain a trust deed You

Obtain a tax file number & ABN

You

Elect to become a regulated fund

You

Open a bank account in the name of the fund

You

Prepare minutes & documentation to admit members to the fund

You

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SMSF Obligations – Ongoing requirements

Legal requirement UltimateResponsibility

Outsource Solutions available to you

Financial Adviser Accountant Administrator

Review Investment Strategy of the fund & its continued suitability given changes to individual members circumstances and legislative changes.

You

Review strategic advice to members (E.g. contributions)

You

Advice on tax deductibility of contributions

You General advice only

Prepare SMSF annual return (includes member contribution details)

You

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SMSF Obligations – Ongoing requirements

Legal requirement UltimateResponsibility

Outsource Solutions available to you

Financial Adviser Accountant Administrator

If paying taxable lump sum payments or income streams:• register for PAYG withholding•Obtain a TFN from member•Issue PAYG payment summary forms

You

Prepare Income Stream documentation when required• Arrange valuation of assets to determine market value•Prepare PDS•Document all details of pension•Prepare centrelink schedule

You

Act as a mailbox for the fund and record all paperwork

You

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SMSF Obligations – Ongoing requirements

Legal requirement UltimateResponsibility

Outsource Solutions available to you

Financial Adviser Accountant Administrator

Maintain transaction records such as:• contributions/benefit payments• rollovers• asset sales and purchases

You

Prepare member statements, including details of:• Opening & closing balances•Transaction & contribution details•Investment return•Termination value

You

Maintain fund records and compliance paperwork

You

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SMSF – Our service solutions

RI Advice - Working with you to achieve your goals

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Self Managed Super Funds

Do it yourself

• Advantages

– Tailored to suit you:

– More control

• Disadvantages

– Only for retirement income

– Must formulate and implement an investment strategy

– Must have a trust deed and trustees

– Must comply with SIS rules

– Severe penalties for non-compliance.

– Responsibility and accountability rests solely with the trustees

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Is Self Managed Super for you?

• Are all the members (trustees) skilled in investing?

• Will business or other real property be purchased?

• When will members reach preservation age?

• How would the withdrawal of a member affect the fund’s assets?

• Does the investment strategy take into account the liquidity requirements for the payment of pensions?

• Do members require insurance cover?

• What are the Member assets outside the SMSF?

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Is Self Managed Super for you?

• What is your fund going to be used for?

• What is the level of involvement you are willing to commit?

• Do you want to out-source?

– investment strategy?

– investment selection?

– administration?

– compliance requirements?

If you like the sound of control and flexibility, but the compliance & administration seems likea burden, we can design an out-source solution which is tailored to you.

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Investment Strategy

Investment Selection

Administration

Compliance

• Investment Advice

• Direct Share advice

• Managed Funds

• Ongoing Investment and Strategic Advice – trustee and member level

• Trust deed & other document services

• Annual accounts

• Audit

• Tax return preparation

Outsourcing - Our Service package solutions

Option 1: Comprehensive service offer

Fee range: $X - $X depending on number of members & complexity of personal circumstances.

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Investment Strategy

Investment Selection

Administration

Compliance

Financial Adviser

• Investment Advice

• Direct Share advice

• Managed Funds

• Ongoing Investment and Strategic Advice – trustee and member level.

Lawyer / Accountant / Super specialists

• Trust deed & other document services

• Annual accounts

• Audit

• Tax return preparation

Outsourcing - Our Service package solutions

Option 2 – Limited service offer: Work with your existing professional advisers

Fee range: $X - $X depending on number of members & complexity of personal circumstances.

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The way forward

Take advantage of this opportunity and get the right advice!

We can save you time, frustration, and work as your strategic coach in providing a complete SMSF solution. Alternatively, we can take a collaborative approach with your existing accountant and legal advisers.

The result is a self managed super investment that is:

• professionally set up

• carefully managed

• creates the freedom for you to take a real hands-on approach to your investment

• minimises risk and administrative time for you.

The personal control, potential tax and cost savings can be substantial, so it's worth considering whether a

SMSF may be right for you.

Thank you for attending

Any questions?