One of the main reasons that Self-Managed Superannuation Funds (SMSFs) are so popular is due to the level of control they offer. SMSFs enable members to have full control over investment decisions, fees, and most importantly, their retirement savings.

However, with this control comes added responsibility. SMSFs operate in the same way as other super funds except that members of SMSFs are also trustees. This means they assume responsibility for decisions regarding the investment of savings, and paying benefits to members. Trustees are required to fully comply with superannuation, tax and corporations legislation.

Failure to perform these duties can result in the trustees facing significant fines and the fund hit with financial penalties. The Australian Tax Office has the power to make a fund non-compliant, disqualify trustees, or instigate civil and/or criminal charges for more severe breaches. Should a fund be deemed non-complying, it will be subject to tax at the highest marginal tax rate.

So, choosing the appropriate structure for the role of trustee is a crucial decision.

Individual or Corporate Trustee?

When deciding on trustees for a fund, there are two options available: individual trustees or a corporate trustee. When making a trustee nomination, due regard should be given to the following:

Individual Trustee

Advantages:

• Reduction in reporting requirements – having an individual trustee can avoid additional paperwork and ASIC reporting requirements required of corporate entities.
• Less onerous procedural requirements – trustee meetings are relatively flexible and not subject to the same requirements as meetings of a corporate entity which must satisfy constitutional requirements.

Disadvantages:

• Costly to amend – individual trustee arrangements are cheap and easy to establish, however, they can have unforseen costs with any changes to trustee arrangements being costly and time-consuming to undertake.
• Record keeping/clarity of ownership – with individual administration, there is a risk that personal assets can become intermingled with fund assets, and the threat of significant penalties.

Corporate Trustee

Advantages:

• Liability management – having a corporate trustee can limit the liability of fund members, with potential litigants having claim on corporate assets as opposed to the members’ personal assets.
• Succession and estate planning – corporate trustees enable smoother succession and estate planning as it is easier and more cost-effective to replace a director of the corporate trustee than change an individual trustee.

Disadvantages:

• Set-up costs – the process of establishing a corporate trustee at the outset can be significant.
• Structure – a new proprietary limited company is required to be registered to act as the SMSF trustee. Company returns must be lodged with ASIC every year and an annual fee paid.

As outlined above, whilst establishing individual trustees may be the most cost-effective option at the outset, the opposite may be true over time. This article has only touched on this important topic. For more information on SMSFs and assistance in choosing the right trustee structure for your circumstances, speak with us here at Intrinsic.

Sources:

ato.gov.au Self-managed super funds – Choose individual trustees or a corporate trustee

Australian Tax Office website www.ato.gov.au Self-managed super funds

 

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Aged care for those on the Land

Arranging aged care can be stressful, but when it involves someone who is a farmer, unique circumstances apply. If your loved one is a farmer on his or her own land, would you know how best to help?

Farmers – often a husband and wife team – may continue working well past retirement age because farming isn’t just a business – it’s a life.

As a family business, the farm might be passed down to the next generation so when considering aged care, questions over whether to retain the assets or to sell them can be daunting and emotional. It’s possible that the options available will be limited by the cost and level of care required.

Aged care costs

Looking at aged care in general, costs vary considerably and residents may be asked to pay the following:

Daily fees. The basic daily fee is set and regulated by the federal government to cover meals, laundry, cleaning, etc. An additional means-tested daily fee may also apply.

Refundable Accommodation Deposit (RAD). This is subject to the resident’s assets and income and is fully refundable. A resident may choose to pay the RAD in full or in combination with Deposit Accommodation Payments (DAP) applying to any unpaid portion. RADs are usually paid from the proceeds of selling the family home. When the family home is a farm, it can get complicated.

Back to the farmers

According to the Australian Government, assets are defined as, “Most of the things you own…” Although different rules apply to properties greater than two hectares of which the owner is putting to effective use, eg. farming. The buildings, equipment, fencing, livestock, etc on the property are considered assets, and their assessment may deem the farmer wealthy, potentially increasing the cost of care.

One of the most pressing issues farmers face when considering aged care is what to do with the business itself. If the decision is made to dispose of the assets by selling or gifting, alternative problems may arise.

Seek professional guidance

A financial planner can help determine the most appropriate course of action while considering the family’s plans for the future of the farm and its assets.

When making arrangements on behalf of an older relative you must ensure that the appropriate Powers of Attorney are in place. Speak to your solicitor; or ask us for a referral.

This is an emotional decision for anyone, but when your home is your work and you’ve worked hard to keep it over generations, deciding what to do next is just that little bit harder.

Sources:

My Aged Care website  www.myagedcare.gov.au

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Leaving it too late to achieve your goals!

Most of us have retirement dreams, and can’t wait to finish work. So once retired, why don’t we start ticking items off the bucket list? There’s no time like now for living your dreams.

When Merv and Carol retired they had grand plans involving a campervan, Kakadu and a dog. Their great Australian road-trip was happening the very next year, after they, “just got few things out of the way”.

Things like their daughter’s November wedding, then the kitchen reno in January. Kakadu wasn’t going anywhere; it could wait until July – after Merv’s knee reconstruction.

Eventually, they stopped putting a date on their road-trip. They were going to Kakadu – Someday!

But in this fast-paced world, someday can be elusive.

Nine years later Merv and Carol finally resumed preparations – they even visited a Campervan Show. But then Merv fell and needed hip surgery, reality hit hard: the road-trip was impossible.

Why do we so often put our dreams on hold?

While it’s unwise to spend retirement savings too quickly, delaying our goals may mean never achieving them – after all none of us are getting any younger. It’s important to enjoy life while still fit and healthy enough. If you’re not sure of your finances, speak to us or your accountant.

The key is to make firm decisions, budget carefully, and stick to your plans.

A wise man once said, “Don’t save a good wine for a special occasion. Open it now and make today that special occasion.”

In other words, live the best life you can – now.   That’s sound advice!