Profile Blog - Category ‘Financial Planning’

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The ATO has outlined the ways in which those impacted by Australia’s bushfire crisis will be given relief from any outstanding tax obligations.



The ATO has outlined the ways in which those impacted by Australia’s bushfire crisis will be given relief from any outstanding tax obligations. 

More information can be found here.

In a statement on the ATO website, the regulator said it did not want those affected to be concerned about their tax affairs, and would be helping individuals with any obligations once the crisis had ceased.

“For identified impacted postcodes, we’ll automatically grant deferrals for lodgments and payments due. You or your agent don’t need to apply for these deferrals,” the ATO said.

“We recognise the ongoing effects of this disaster and will continue to update identified impacted postcodes.”

Lists of impacted postcodes in Queensland, New South Wales, South Australia and Victoria were available on the ATO website. Automatic deferrals applied to both businesses and residential addresses, the ATO said.

Those who had been impacted but did not reside in a postcode that was on the ATO’s identified impacted postcode list could call the regulator’s Emergency Support Infoline for assistance. Alternative helplines were available for non-English speakers, Aboriginal or Torres Strait Islanders and those with hearing or speaking difficulties.

“To help you, we can, for example, give you extra time to pay your debt or lodge tax forms; help you find your lost tax file number by using methods to verify your identity such as date of birth, address and bank account details; re-issue income tax returns, activity statements and notices of assessment; help you reconstruct tax records that were lost or damaged; fast-track any refunds owed; set up a payment plan tailored to your circumstances including interest-free period; [and] remit penalties or interest charged during the time you were affected,” the ATO said.

Individuals could also talk to their tax agent, who could work with the ATO to provide appropriate support, the regulator said.


Sarah Kendell
07 January 2020







As it goes, 2020 is unlikely to bring a period of prolonged stability that investors are hoping for.


While there are a range of views on what this year's market conditions and economic growth rate might be, it is safe to say that the plethora of voices are largely in agreement that investors should brace themselves for a lower returns for a much longer period global growth scenario.

This should come as no surprise to most, given the circumstances where trade tensions and unpredictable policymaking have weighed negatively on global demand and supply.

Amid this new age of heightened global tension and market uncertainty, we are all understandably looking for some portfolio R&R: rebalance and returns.

In such a time, the best strategy is to focus on the long-term, follow the tried and true path of diversification and minimise costs where possible. The latter, in particular, is at the heart of Vanguard's investment philosophy; simply put, the less you pay for investments, the more you keep in your pocket.

So what are the trends we are likely to see in 2020 in low-cost funds that advisers and investors alike may want to consider?

Shift from high-cost products to low-cost products

While cost is not the only factor to consider when investing, it certainly is an important one. As we believe at Vanguard, you can't control the markets but you can control the costs of your investments.

With this in mind, index investing has become a globally accepted investment approach over the last decade, and it shows no signs of slowing down. In more recent times, the focus has also shifted to lower-cost active and factor investments in the market. The traditionally high costs of active investing (be that management fees, administrative costs, commissions and the like) have significant impacts on net returns – the return that really matters to investors. Add to this the considerable evidence that traditional active products underperform the market on average after fees, it builds a compelling argument to focus on minimising costs in your investment portfolio.

Greater cost transparency may favour low-cost products

Scrutiny of the financial advice industry continues in 2020, with the Financial Adviser Standards and Ethics Authority (FASEA)'s Code of Ethics now in full effect since 1 January. The code comprises a set of principles that all financial advisers must adhere to, including a standard of client care that states clients must be advised and understanding of product cost structures and any associated fees.

This standard elaborates on the principle that advisers must act in the best interests of their clients.

While for most advisers this is nothing new, for some it may mean clients asking for more justification of higher-cost products than they previously did. This might stimulate a shift towards lower-cost investment products as investors become more cost-conscious and seek greater transparency on their potential investments.

Moreover, in the wake of the Hayne royal commission and the subsequent media coverage on practices that fail to meet client and community expectations in the adviser space, financial regulators and investors alike will probably be watching closely for any misbehaviour, particularly regarding high or dubious fees.

However, for many advisers, this is an opportune time to define a unique value proposition, demonstrate their value and strengthen client relationships, reminding clients that the value of financial advice can be more than a number on an investment statement that is higher than market benchmarks.

In times of market shocks an adviser's experience and stewardship can be particularly valuable to clients because left alone investors can make choices that impair their returns and put at risk their ability to achieve their long-term objectives.

Consistent research, including that done by Vanguard, highlight that the value of good financial advice is much broader than investment selection.

Ethical investing gaining momentum

Environmental, social and governance (ESG) issues are unsurprisingly at the forefront of investors' minds.

We know from our global experience that there are a variety of humanitarian, ethical and social concerns many people want to factor into their decision‐making process when it comes to selecting investment funds and, in recent years, we have seen an increasingly diverse set of Australian investors adopt ESG products from those who are seeking to achieve their investment objectives while also investing in line with their values. Especially with the country still reeling from the bushfire crisis, many investors both new and experienced have a wide variety of humanitarian, ethical, environmental, and social concerns that they want to see reflected in their investments.

In addition, key signals are emerging that indicate the market is becoming more conducive to ESG investing. The recent focus on the economic health of companies based on sustainable practices, especially after the global financial crisis, has further aided momentum around screened ESG investing. Regulatory change is also driving increased adoption of screened ESG products by institutional investors in some regions of the world.

It is important to note that costs can vary widely among ESG products. There are a number of low-cost indexed products available, along with some products, often active management strategies, that carry higher expense ratios. The cost of a product is often largely dependent on the firm offering the product, its agreement with the benchmark provider that constructs the index, management expenses etc. Because ESG products are predominantly actively managed, they typically involve a higher cost. ESG funds also tend to be smaller in scale and as a result, may come with a cost drag. As with conventional funds, Vanguard's advice is to always seek out low-cost, high-quality ESG products.

The stability of fixed income in a period of instability

The world has been in a stretch of geopolitical uncertainty for a while now and slowing economic growth is the new mantra. It is not surprising to see this reflected in investor sentiment – despite a booming 2019 for the Australian equity market. The tempered sentiment was best reflected in last year's boom in fixed income funds as investors sought to rebalance their portfolios in a bid to weather increasing market volatility.

With Vanguard's 2020 market and economic outlook predicting lower returns for longer, it is likely that we will continue to see an increase in the number of investors throwing their weight behind fixed income products, as a way of rebalancing and or de-risking portfolios. With the continued growth in this specific asset class it is expected that more inflows will move into globally focused fixed income products as investors look for greater diversification and possibly higher yields by tapping into the much larger pool of bond issues in the US, Europe and elsewhere.

Alternative investments

A growing number of investors are seeking diversification and returns from alternative investment options outside of the usual asset classes of shares and bonds.

While alternative investments are not a new concept, the current low-return environment is pushing investors and asset managers towards funds that have a low correlation with the stock market. Non-traditional assets include, for example, private equity, real estate and infrastructure.

Private equity is a large and growing proportion of the overall equity market as it offers investors diversification through access to a broader and uncorrelated investment universe.

It is worth noting that alternatives should not be a considered option for all investors. While many alternatives may have lower exposure to market risk, they do introduce other factors to consider when constructing a portfolio such a liquidity risk, less transparency and regulatory risk.

Generating returns from alternative investments also relies heavily on the skill of the investor or asset manager, and places an even greater focus on choosing the right investment manager to maximise after fee returns.

Developments in retirement income product design

The Australian government has been developing the Retirement Income Framework since 2016 with the intention of improving the currently under-developed retirement phase of superannuation. This framework will require superannuation funds to develop a strategy for their members that would substitute or supplement the Age Pension and ensure that they have sufficient funds to cover their life span. This could mean the creation or employment of more low-fee investment products that can provide retirees with a steady income for life while still remaining cost-effective.

In summary

Heading into 2020, financial markets most likely will remain decidedly jittery. Asset class returns will vary, as they always do, depending on many market and geopolitical factors.

Spreading your money across a range of investments is one of the best ways to reduce your exposure to market risk. This way you are not relying on the returns of a single asset class.

The right mix of asset classes or investments for you will depend on your goals, time frame and tolerance for risk.

Seeking the assistance of a professional financial adviser to help you determine the optimal asset allocation for your individual needs, combined with a low-cost investment portfolio is certainly one path towards meeting your financial goals.



Evan Reedman
Head of Product, Vanguard Investments
18 February 2020



Is your self-managed super fund fully compliant with the regulations governing the operation of private funds?


It's a question that all SMSF trustees should be asking, because the Australian Tax Office is not only watching but taking harsh action in the form of issuing penalties for non-compliance.

ATO Assistant Commissioner Dana Fleming told the SMSF Association's annual conference in February that the SMSF regulator has its sights on almost 90,000 private funds that are managing over $20 billion in assets.

These include around 24,000 SMSFs managing $1 billion in assets, which have never lodged a tax return, and another 63,000 managing $19.5 billion that have stopped lodging mandatory documents with the ATO.

The ATO definitely means business. It issued more than $3 million fines to SMSF trustees in the six months to the end of December, more than double the amount of fines levied over the full 2018-19 financial year.

Trustee ignorance is not a defence

While the ATO is most concerned with deliberate compliance breaches by SMSF trustees, the regulator has consistently made it clear that trustees need to be fully aware of their legal obligations under the Superannuation Industry Supervision Act.

Trustees also need to strictly abide by their SMSF trust deed, which can contain stipulations on the types of assets their fund is allowed to invest in. Unless read carefully, a trustee could inadvertently breach the conditions of their own fund.

Non-compliance is certainly not a new theme across Australia's SMSF population, which now totals almost 600,000 funds, 1.12 million members and $750 billion in assets.

But the difference now is that the ATO has become much more sophisticated in its capacity to track the activities of SMSF trustees, both at the individual and corporate level. The ATO's computer systems are now at a level where they can easily detect digital payment transactions at multiple points.

In December last year, the ATO warned it had identified multiple breaches of the sole purpose test applying to SMSF members involving the purchase of lifestyle assets being used for personal enjoyment by fund trustees and their beneficiaries.

These included assets such as cars, boats, holiday homes, art and other collectables, which the ATO has been able to track in a number of ways.

Do you really need an SMSF?

Most SMSFs were set up for one specific reason: to have full investment control.

Rolled into that is the ability to buy direct property assets, which is not possible within a professionally managed super fund.

Business owners with an SMSF have the ability to own a commercial property within their fund and use it for their business purposes, without breaching the sole purpose test. This can't be done with residential property.

But ATO quarterly data shows only about 9 per cent of total SMSF assets were invested in commercial property at the end of December 2019, and less than 5 per cent were invested in residential property. A further 12 per cent of assets were invested in unlisted trusts, of which some will involve having shareholdings in direct property developments.

The bulk of SMSF assets (75 per cent) are actually held in the same asset classes that members of professionally managed super funds are exposed to, such as Australian and international shares, fixed income, listed trusts and cash.

And, unless SMSF trustees are consistently outperforming the returns of the professional fund managers, one would have to question why having a SMSF is really needed.

The Productivity Commission's 2019 report Superannuation: Assessing efficiency and competitiveness found that SMSFs with balances below $500,000 produce lower returns on average, after expenses and tax, when compared to industry and retail super funds.

The Australian Securities and Investments Commission also warned in October that the decision to establish an SMSF should not be taken lightly.

“SMSFs may be an attractive option for investors wanting more control over their superannuation investment strategy, but it requires real skill, care and diligence to manage your own superannuation,” ASIC said.

“SMSFs are not for everyone simply because not everyone can meet the significant time, costs, risks and obligations associated with establishing and running one.”

Time and money

Operating an SMSF comes with two unavoidable components: the time involved in ongoing management and compliance, and the costs involved in accounting, auditing and other professional services.

Another often overlooked aspect is the cost of insurance. Where large super funds are able to use their size to negotiate competitive pricing for insurance, such as life and total and permanent disablement coverage for members, SMSF trustees sourcing cover will invariably pay a higher cost.

ASIC calculates that, on average, SMSF trustees spend more than 100 hours a year managing their SMSF. This includes the time taken when investing and managing investments, and in preparing documentation.

The bottom line on SMSFs

SMSFs remain an important component of the Australian superannuation landscape, and by total assets under management represent the biggest segment of the industry.

However, it's clear on a range of compliance levels that some trustees operating a SMSF are failing to invest within the parameters of the law and are not meeting their management obligations.

In addition, many SMSF trustees – while having more investment flexibility than professionally managed super funds –are largely investing their retirement savings in the same asset classes as the professional fund managers.

ATO data on SMSF asset allocations shows many private funds are not well diversified, with very high allocations to cash.

ASIC notes that SMSFs are not an appropriate investment option for people who want a simple superannuation solution, particularly if they have a low level of financial literacy or limited time to manage their own financial affairs.

“Where people have limited investment decision-making experience or prefer to delegate decision-making to someone else, they should carefully consider if an SMSF is right for them,” the regulator says.

“As the trustees of their own fund, SMSF investors must remember that they are responsible for their fund's compliance with the law, even if they pay a professional to help.”



Tony Kaye
Personal Finance Writer



A 16-year study by Vanguard Investments that found a financial adviser effectively adds around 3% to the value of a client’s portfolio over time.  This is on top of normal investment returns.



The real significance of this is that you can have a finance professional take care of one of the most important jobs in your life (funding your retirement) for very little, if any, real cost.  This can even be the case for those with smaller portfolios.

This benefit isn’t just from better investing, though that will often be the case.  It’s the more holistic approach that wins the day.  Vanguard Investments identify the following areas as those that will generate this positive outcome:

  • Suitable asset allocation
  • Cost-effective implementation (expense ratios)
  • Rebalancing
  • Behavioural coaching (Vanguard Investments found this to be the most significant contributor because there are some tasks people struggle with such as budgeting and expense management.  Behavioural coaching addresses this issue).
  • Tax efficiency (An example here is where an investor with a modest portfolio lost more than $250,000 in value over a 10-12 year period because they thought the three stock brokers they used were looking after tax related issues.  They weren’t!  If the planner had been involved sooner the outcomes would have been significantly different.)
  • Total returns versus income investing.

Finally, the concerns many potential clients have over the cost of financial planning means they delay getting help early enough which, in turn, threatens the very retirement outcomes they want to achieve. 


Peter Graham
PlannerWeb / AcctWeb


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