Profile Blog

The uptake of six-member SMSFs is primarily being driven by trustees over the age of 80 who want their adult children to take over the management of the fund.

Speaking to SMSF Adviser, SMSF Association deputy chief executive Peter Burgess said while there has not been significant uptake of six-member SMSFs since the legislation allowing this was passed, the ATO statistics indicate around 90 or so funds now have six members. 

Mr Burgess said there had been renewed interest around adding additional members to funds, and many of the conversations around this involve trustees who are getting to an age where managing and administering their funds is getting too difficult for them.

“What they’re doing is inviting their adult children not only to join the fund but to take over the management of the fund,” said Mr Burgess.

“That opens up a whole load of questions and issues around decision making and who’s making decisions and how decisions are going to be made.”

Mr Burgess said this could see a new type of SMSF come into play where there are adult children in the fund, and they’re becoming the decision-makers.

“When you consider that the ageing population of SMSF trustees and the proportion of SMSF members who are 80 years and over is growing every year. We might start to see some renewed interest as a result of this legislation to add additional members to funds,” he said.

“There are issues to consider, and this is where an SMSF specialist comes into play in being able to point out the risk with adding additional members to their fund and how to deal with decision making and things like that in the future.”

 

 

Miranda Brownlee

05 January 2022

smsfadviser.com

An explanation of the difference between a Bull and Bear run.

The terms ‘Bull’ market and ‘Bear’ market are always in the news and most know what they

mean, though a brief definition is noted below. The point of this chart is to allow us to see

more detail on Bull and Bear periods in regard to the Australian All Ords since 1970. A

quick snapshot, but interesting.

 

What is a bull market?

 

A market is referred to as a ‘bull’ market when the share market is showing confidence. It is

essentially a market in which share prices continue to rise, encouraging buying. After a

sustained period of increasing share prices, investors gain faith that the uptrend will continue

in the long-term. In a typical bull-market, the country’s economy is strong and

unemployment is low.

 

A market may be called a bull market after a number of ‘bullish’ days in succession, but the

technical criteria for a bull market is a rise in the value of the market by 20%.

 

What is a bear market?

 

‘Bear’ markets are the opposite of bull markets, and while there’s no hard and fast rule, the

generally-accepted definition is that they occur when the markets fall by more than 20%. In

bear markets, the prices of securities are falling, and widespread pessimism among investors

caused by the falling prices leads to self-sustaining negative sentiment.

 

 

The ATO will not take compliance action against funds that have not reported a TBA event after the commencement of a new pension in the interim.

 

 

The ATO will not take compliance action in the short-term against super funds that have failed to report transfer balance account (TBA) events after the commutation and/or commencement of a new income stream.

The decision followed numerous challenges faced by funds when reporting market-linked pension commutations where the term has expired and a new pension has begun, according to an ATO update.

“In August 2020, we advised you in CRT Alert 042/2020 that, due to the delay in publishing our guidelines on calculating the value of the debit, we weren’t expecting any funds to begin to commence their retrospective reporting until November 2020 and we would issue further guidance. On 6 September 2021, the ATO published updated guidance on market-linked pensions,” the regulator said.

“Treasury has released exposure draft law to amend the regulations to allow commutations of certain capped defined benefit income streams to occur to comply with commutation authorities and address excess transfer balance amounts.

“In anticipation of this regulation change, funds who support these products should now prepare their transfer balance cap reporting/re-reporting of any commutations that have not yet been submitted using the new calculation.”

While the ATO said it will avoid taking compliance action, it expected super funds to start reporting new income streams once the regulations began to ensure the period in which affected members accrue excess transfer balance tax liabilities begins on or after the commencement of the regulations.

“This will allow appropriate tax outcomes for these individuals given their prior inability to comply with the transfer cap rules,” it said.

Super funds and their members with specific circumstances have been advised to seek guidance from their client relationship manager or team for further instructions to confirm when the fund planned to commence reporting.

“If the reporting is before the regulations commence, then your members should contact the ATO if they receive a determination and request an extension of time to make an election,” the ATO advised.

Additionally, the ATO has updated the content of its SMSF alerts in regards to the registration of a new SMSF or changes to an existing fund’s financial institution account details, electronic service address, authorised contact or members.

“The improvements to the alert messaging are a result of your feedback and will now provide greater transparency of any changes made. This will assist members, trustees and directors to make informed decisions and take action to mitigate potential fraud behaviour where changes were not requested by an authorised person,” it stated.

 

 

Tia Thomas
January 14, 2022
smsftrusteenews.com.au

 

Come back each day and click on the next date for another inspirational quote or poem from some of the greatest writers and poets.

(Please click on the image to open the Advent Calendar and then click on a date)

The growth trajectory of more Millennial SMSFs is set to continue in the years to come, according to the chief executive of Smarter SMSF.

 shared some reasons as to why the Millennial cohort is commanding more share in the number of new SMSF entrants than in years past.

“Historically, the trends are, and this is from the ATO statistics, that entrants are getting younger and younger and younger. So the quarterly data is continuing to show that under age 45, and then even in the 40-to-45 and the 35-to-40 bracket, that is by and large where the largest cohorts are entering the system,” he said.

“Now, why is that the case? I think it’s a combination of reasons. I think, one, if you think about that age group, they’ve had compulsory super their entire life. So from that point of view, we’re looking at account balances that would be more reflective of considering self-managed super funds.

“We’re seeing that group of people probably being more financially literate than ever before. So they understand risk-return financial markets, some might invest in cryptocurrency, but that’s probably a separate conversation.”

Further, Mr Dunn said technology take-up in the sector could be the reason for the rise in new entrants.

“We’re seeing more and more technology come on board, which means that the cost of being able to manage and maintain the fund is so much more cost-effective. And the SMSF Association really validated a lot of that and debunked ASIC’s fact sheet that they had last year by releasing research to show that costs are coming down, which, therefore, means the framework for entry points and appropriateness is also changing,” he said.

“So this to me is further validation of all of those things that we’re seeing because of the fact that there are different products, greater understanding, more super balances, get married, partner it up with someone, and you quite quickly get enough balance to make it cost-comparative to where you may be at at the current point in time.”

Mr Dunn’s comments come off the back of new data by AUSIEX (Australian Investment Exchange Limited), which revealed during the first quarter of financial year 2022 (July to September) that there was a 9.3 per cent increase in new SMSF accounts opened compared to FY21 Q1.

Gen Y or Millennials (born 1981-1996) represent the fastest-growing segment of new SMSF accounts. The year 2020 onwards has seen a new pattern emerge, with this group representing 10 per cent of all new accounts – double the rates seen from 2016 to 2019.

During FY21, there was also an emerging trend in SMSF accounts opened by Gen Z (born 1997-2012). The number of SMSF accounts owned by Gen Z investors has doubled in the past 12 months. 

Looking ahead, Mr Dunn noted that while the take-up in SMSFs is great to see, it’s also important to consider certain challenges.

“People [have] become highly engaged in that SMSF sense. So a lot of those people may be self-directed in that respect. So then the challenge is, ‘Well, they’ll be self-directed in some aspects of the investments’. So they might have specific interests themselves in different asset classes, but then it’s finding the balance to go, ‘OK. But I need help along the way’,” he said.

“So it might be, ‘I need a specific piece of advice that helps me at this point in time. I might need some specific advice to help me to make sure I’ve got my insurance in order. It might be to help me with a particular investment’.

“And it’s obviously a conversation for another day, but it’s where the advice framework will sit as we move into 2022 with some of the quality of advice reforms as well. So, it’s not that they’re just going to go out on their own and try and build it all themselves. And that’s going to be one of the things the government is going to have to identify and come to terms with, with these younger entrants coming in, because they are not DIYers, the old DIY super fund, they are self-managed funds, but they’re coming in with perceptions of what they can do, but there’ll be things where they’ll need assistance as well.

“And making sure that they can get that and it’s affordable will be the other big challenge.”

 

Emma Ryan

29 November 2021

 

accountantsdaily.com.au

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