Month: February 2020
Limitations to the Superannuation Death Benefit
SMSFs are limited in the way they may pay a Superannuation Death Benefit and as a trustee, you must take in to account the limitations and how to apply the rules.Firstly, death benefits can only be paid either to dependants of a deceased member or to the estate of the deceased.
Second, the law limits the group of dependants who are eligible to receive a pension on the death of a deceased member.
Finally, trustees must pay a death benefit as soon as possible after the death of a member. Additionally, each death benefit interest can only be paid to each dependant as either:
- a maximum of two lump sums (an interim and a final lump sum), or
- a pension or pensions in retirement phase, or
- a combination of both.
Given the account-based nature of death benefit pensions that can be paid by a SMSF trustee, a SMSF member is generally afforded the flexibility to nominate to convert a death benefit pension into a lump sum payment. This process is generally referred to as the commutation of a pension, although it may be subject to specific restrictions found in a trust deed.
A partial commutation is where a beneficiary requests to withdraw a lump sum amount less than their total pension entitlement, allowing their death benefit pension to continue. This is common where members withdraw their required minimum drawdown as a pension with any additional income needs met by accessing multiple lump sums from their pension account. This strategy allows the death benefit pension to continue without breaching the superannuation death benefit rules, despite payments in excess of the maximum two lump sum limit.
A full commutation will result in the death benefit pension ceasing at the time a member decides to withdraw their entire pension entitlement as a lump sum. Despite the number of lump sum death benefits previously received, the law allows a beneficiary to roll over the lump sum resulting from a full commutation to another superannuation fund for immediate cashing as a new death benefit pension.
However, where a lump sum resulting from the full commutation of a death benefit pension is paid out of the superannuation system, further clarity is being sought from the ATO to ascertain whether or not this will be treated as an additional lump sum death benefit that would count towards the maximum two lump sum cashing limit. Until further clarity is provided by the ATO, caution needs to be exercised before a death benefit pension is fully commuted and paid to a dependant, especially where a dependant has previously received a lump sum death benefit.
As a SMSF trustee you need to be aware of the restrictions placed on the payment of death benefits to eligible dependants of a deceased member. Trustees who ignore these limitations risk breaching superannuation standards and potentially being liable to be fined by the Regulator.
How can YML help?
Talk to our YML Super Solutions Team today to see how YML Group can assist you with your SMSF death benefit payments. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Should you pay principal + interest on your investment property?
It makes sense to pay principal + interest when you’re paying off a home loan. Home loan interest rates are currently very low and building up equity in your home increases your asset value over time. However, when it comes to investment properties, there are two ways you can go with loans to fund your investment.Paying interest-only on a property investment loan frees up your cash flow, possibly providing you with the funds for additional investments or to pay down other debt. Yet, interest-only loans aren’t for everyone. You’ll need to stay focussed and balance your cash flow to minimize debt exposure.
Consider switching to a principal + interest loan for an investment property. Comparing a number of banks’ interest rates shows it’s a good time to pay off some of the principal as well as paying off the interest.
Major and minor banks are now offering investor loans with principal + interest repayments at nearly 1% lower than an interest-only investor loan. This means you could easily be paying more of the principal of your investor loan.
To best understand how paying interest-only versus paying principal + interest can affect your tax deductibility, let YML Group calculate the savings for you.
To determine why a principal + interest investor loan might rather be in your best interest in today’s economic climate, consult YML Group for expert financial advice.
How can YML help?
Talk to our YML Finance Team today to see how YML Group can assist you with your mortgage strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
Business Intelligence (BI) in Small Business
Data analytics is fast becoming a most vital instrument in a small business’s digital toolbox. Business intelligence (BI) utilises data and the analysis of data, both internal and external, to develop ways for an organisation to improve its overall market share within its industry.A business’s data can be collected easily in today’s technological environment, but interpreting the data in a way that delivers commercial advantages to a business can be harder to do. BI software and all its practices of analysing collected data may inform business decisions, enhance customer communication and generate marketing approaches.
BI software is available from a myriad of software providers and once it has been integrated in to your business’s digital mix, there are ways to specifically apply it to your business. BI provides custom dashboards, predictive – ‘what if?’-style – analyses and, importantly, reports that can interact with your other digital programs.
Here are a few examples of BI-in-action in small business:
Local Restaurant Chain
Head office management of logistical and marketing operations was difficult due to disparate sources of data
- When a new self-service BI platform was introduced in to the stores, a centralised view of operations of all stores was possible. This meant management could now track large-scale operational effectiveness, whilst enabling speedier reporting, greater access in-store to helpful data and a more effective and individualised strategic approach store-to-store. Supply chain stabilisation was possible when disparate data was finally consolidated via a BI method.
Manual marketing reporting took too long to complete and was untimely, limiting insightful marketing communications
- BI solved this company’s problem by delivering a centralised and automated reporting process from digitally-extracted data. The existing marketing analytics team was able to better inform the marketing strategy team, providing timely information on customer behaviour. The company was able to be reactive to its various types of customers and thereby improve customer service and customer retention.
Restrictive access to in-the-field manual sales and operations data hindered growth
- BI came to the rescue through automation of the company’s customer relationship management (CRM) platform. Mobile dashboards provided to the company’s sales representatives gave the salesforce critical information they could use to enrich customer relationship-building and to use as a competitive advantage. With their mobile, interactive dashboards, the company’s IT team and the salesforce cooperated more effectively to improve CRM. This, in turn, created a more collaborative environment, benefiting both customers and company operational logistics.
Small businesses do not usually have the same financial resources as big business, but BI is affordable and achievable on a relative scale. When your business’s data is accurately and optimally analysed, you may find you have far greater ability to make data-based decisions that can propel your business towards a more profitable future.
How can YML help?
Talk to our YML Innovation Team today to see how YML Group can assist you with your Business Intelligence strategy. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.
