Matters to Consider Before Setting Up an SMSF

A Self-Managed Superannuation Fund (SMSF) is essentially a do-it-yourself super plan that can have up to four members. One of the main motivations for setting up an SMSF is to be in control of your own fund and how investments are made. As well as the development of a sound investment strategy, running a fund also requires certain skills in terms of administrative, financial and legal matters.

If you are thinking about setting up your own SMSF, here are some of the factors to consider.

Skills and responsibilities

• Your role – with an SMSF, you need to take on the role of trustee or director, which comes with legal obligations and considerable responsibilities, including personal responsibility for compliance.
• Investment skills – you will need to have the time and skills to research investment options, to understand how investment works and to develop a sound long-term strategy.
• Administration – there is a considerable amount of administration required in running a fund, including record-keeping, taxation, compliance, keeping up with government legislative changes regarding super and tax, and so on. You also need to be able to engage directly with the ATO.

If you wish to set up your own fund but lack the skills or time required to run it, you may of course be able to hire someone else to do the work for you.

Financial matters

• Enough money to invest – it’s usually recommended you should have at least $200,000 to invest to make an SMSF worthwhile in terms of the fees involved. Investment options may include property, shares, term deposits, managed funds, artworks, or even antiques.
• Fees – these are likely to include payments for independent audits, annual returns, asset valuations, legal matters, insurance, and professional advice. You need to bear in mind that the fees involved may be proportionally higher than for an industry fund.
• Borrowing to invest – since 2007, it has been possible for SMSFs to borrow to invest in assets such as property, shares, and land. There are however some stringent rules around this that you need to be aware of – such as the single-asset rule per borrowing arrangement, and restrictions on asset improvements.

Insurance

• Life insurances – super funds generally offer insurance to members in terms of life, disability, accident and income protection cover, and also usually have the advantage of group buying power which can lower the premiums for members. SMSFs are obliged to offer life insurance to members, and in this case you would need to purchase your own insurance cover.
• Other insurance – cover should also be taken out for assets such as property to provide financial protection.

General questions to ask yourself before going ahead

• How well will your SMSF be able to outperform other funds?
• Do you have the skills, time and motivation required (or alternatively the means to pay someone else) to administer the fund?
• What other options are available? For instance, if you are not happy with the performance of a fund you are a member of, you might be able to switch to a more suitable one. If it is more control over investments you want, some funds allow you to have input into how your money is invested.

If you enjoy investing and have strong skills in financial management and a good grasp of legal matters, an SMSF may be a good option for you. On the other hand, if you lack the skills and time but would still like to set up your own fund, consider utilising the expertise of an SMSF accounting firm in Sydney to administer the fund on your behalf.

Does your super fund provide enough life insurance cover?

According to research by Lifewise.org - 50% of Industry Super Fund members are under-insured by $100,000 for life insurance. While insurance through super can be cheaper and have certain tax advantages, many funds only provide the basic level of cover, which may not necessarily reflect your individual circumstances.

• Life Insurance - which can help provide for your loved ones if you die.
• Total & Permanent Disability Insurance (TPD) - which can replace your income if you are injured and can’t ever work again.
• Income Protection Insurance - which can pay you a percentage of your salary if an injury or illness results in you not working for a period of time.

• How much money will my family require to cover household expenses and immediate bills such as funeral expenses?
• How much money will my family require to pay off all debts – including credit cards and mortgage?
• What lifestyle aspirations do I have for my family and what support do I want to provide for my dependents?

4 reasons to consider refinancing your home loan

If you’ve had your home loan for a number of years, it’s likely that your personal and financial situation has changed and now could be a good time to investigate the option of refinancing. Here are four reasons to consider refinancing your home loan:

1. Reduce your monthly repayments:
   Refinancing to a new lender or loan may let you take advantage of lower interest rates on offer. More competitive interest rates can help lower your monthly mortgage repayments.
2. Use the equity in your home:
   Refinancing allows you to access the equity in your home. You can get a line of credit based on the value of your home and the amount that you have already paid on your mortgage. This is a popular way to renovate an existing property or access money to make an investment or big purchase.
3. Consolidate debts:
   Refinancing can help you to consolidate debts such as a personal loan, car loan or credit card into your mortgage, to take advantage of the lower rate typical of a home loan.
4. Switch between variable and fixed rate loans:
   If you like the certainty that your home loan repayments will stay the same over a period of time, you may wish to switch to a fixed rate loan. Or you may decide to take advantage of a lower variable rate loan if you are willing to accept the risk that rates could increase in the future.

If you’re considering refinancing your home loan, the YML Finance Team offers a range of refinancing and consolidation loans.

Succession plan basics for small business

Even if you’re not planning to retire for many years, it’s still important to have a strategy for exiting your business. According to a recent report undertaken across more than 1,200 Australian SME businesses, 35% of business owners have no ultimate exit plan.

The importance of a succession plan
Let’s face it – nothing in life is permanent and one day your life as a business owner will come to an end. This may be due to retirement, but other factors to consider are ill health, accident, death or simply because you’ve decided to move on to something new. A well-structured succession strategy helps mitigate a wide range of risks and ensures, among other things, the future stability and success of your business. While all succession plans vary in complexity and objectives, there are some key questions all business owners should consider.

• Who will your successor be?
  Will your successor be a family member, a business partner or someone external to the business? It’s important that the potential successor is provided with appropriate training and given a reasonable time period to learn the main aspects of the business.
• What is your exit strategy?
  Will you retire altogether or continue to be involved on a part-time basis? If the latter, what will your involvement entail and for how long?
• What are the financial considerations?
  What is the current market value of the business? What is the minimum sale price required and who will receive the proceeds? Are there any retirement payments required for retiring owner/s and what are the terms? If you are in a partnership and you plan to arrange a buyout, what is the value of your share?
• Will there be any key personnel changes?
  If you have employees, you may need to reshuffle key personnel. It’s important to write a clear job description for each position, including the skills, qualifications and training required. You should also list who you expect to be in the position, or if it will be vacant after the reshuffle.
• What registration transfers are required?
  Consider ABN, GST, domain names, intellectual property rights, licenses, permits, subscriptions, memberships and so on.
• What are the legal and tax requirements?
  Documents will need to be drawn up dictating the terms of the succession and contracts may need to be modified or new ones drawn up in the event of the succession. Also consider what taxes are payable in the event of a transfer or sale.
• What are the partnership arrangements?
  Do you have a buy/sell agreement in place? What are the terms? Will the remaining partner/s buy your partnership share or will it be open to external partners or family members?
• What are the insurance implications?
  What insurance policies do you currently hold in the event of disability, death or injury? How will the proceeds be distributed?
• What are the risk factors?
  What are the risks to succession and what contingencies do you need to put in place?

Think of business succession as a process rather than an event and take action now with a view to the longer term. YML Chartered Accountants can help you develop a robust succession plan that will help ensure the long-term success of your business.

 Sources:
https://www.scottishpacific.com/images/pdf-files/2015-Scottish-Pacific-SME-Growth-Index.pdf.pdf

Why Business Owners Should Think Like Futurists

Innovation in technology is happening at a rapid rate, and there’s no doubt that it is leading to shifts in the way we live from day-to-day. These shifts are only going to happen more quickly in the coming years, bringing in changes in consumer behaviour, and changes to the products and services that people want and need. In order to take advantage of these changes, business owners need to think like futurists, and be ready to adapt.

So what exactly is a futurist?

Broadly speaking, futurists analyse current trends, and based on that, make predictions for the future. The idea behind thinking like a futurist is to understand, get ready for and capitalise on coming changes.

Looking down the barrel of change

There’s no doubt that change will be exponential over the coming years. We’re already seeing the impact of innovative technology in 3D printers, and services like car-sharing company Uber that have turned traditional industries on their head.

Thinking ahead, consider how driverless vehicles might impact on the transport industry. The construction industry is another one where change will be significant – new building materials, and changes in the way housing estates and commercial buildings are powered.

Futurists watching the healthcare space give us fantastic clues to how it could look a few years from now. Futurist Jim Carroll foresees technology functioning as a “dashboard for the human body.” Gene therapy, artificial organs produced by 3D printers, regenerating cells, tissue, or organs, and so on all seem possible.

We’re likely to see huge strides in wearable tech, and gains in artificial intelligence and autonomous robots.

What is certain is that there will be plenty of opportunities for forward thinking entrepreneurs to get in on the ground floor with new products and services.

Business owners must be ready for change

Well known futurist Craig Rispin says that in order to succeed in the marketplace, business owners need to “know first, be first, and profit first.”

In order for business owners to think like futurists he says they should:

• Think long term – it’s necessary to look 10 and 20 years into the future rather than focusing on the short term.
• Think global rather than local.
• Consider more than one future – there can be multiple outcomes or possibilities.
• Gather information widely – not just from familiar sources or from within one industry. It’s important to look to what’s happening in a wide cross-section of industries when considering what the future might hold.

Look to the future, but keep one eye on the now

Finally, it’s important to analyse current trends in order to not only make predictions about the future, but also to capitalise on them now. There are many new technologies that are proving to be a boon for SME owners. For example, moving business operations like accounting to the cloud is a current trend that has yet to reach its full potential. The cloud offers many business benefits, such as the ability to automate and streamline processes, and time and cost savings. So why not consider switching to cloud accountants in Sydney? After all, you can’t be a futurist if you’re already lagging behind!

Avoiding the Wealth Creation Con Artists

Many people in their 50s and older are recognising they are getting closer to retirement age, and may not have enough superannuation to get them through their later years. And it’s no surprise that wealth creation experts are popping up everywhere to help, offering books, seminars and investment options! Some of these experts offer sound advice, others promote risky strategies, and in some cases, others are con artists selling dodgy wealth creation schemes.

While some investment scams are obvious, others are not so much. Con artists may not necessarily look like the Artful Dodger or the super smooth talking scammer you might see on a TV show or film. In some cases, they may be trusted members of the community.

So, how do you tell the difference between a con, and a sound financial expert who will provide you with good advice? Read on for some tips.

Types of Investment Scams

There are numerous types of money scams, some of which include:

• False self-managed super funds (SMSFs) – often involving large commissions for moving your super to a possibly fake SMSF.
• Online stockbroking scams – which can lead to loss of money and identity theft.
• Tax scams – promise of tax refunds that don’t have anything to do with the tax office!
• Property schemes – that promise enormous returns for little effort.

What To Watch Out For

When it comes to investing, there are no quick fixes or magic answers, and all investment involves some level of risk. But there are certain things to be vigilant about, including:

• Fantastical claims that promise quick and guaranteed returns for minimum risk.
• Persistence and pushiness – for instance if you are being pushed to switch from your current investment to theirs with outlandish promises, or to be quick about making a decision or you will ‘miss out’.
• Slick websites that show constantly outstanding returns way over and above their peers.
• Cases where a junior staff member calls you and then passes you onto someone more senior when you show interest.

Think about it – if it was as easy as the person promising you streets of gold says, why are they sitting in an office talking to you?

Questions and Research

Of course not all investment schemes are scams and there are plenty of legitimate financial experts out there.

Before you hand over details or any money, it pays to ask a few pertinent questions, such as the name of the individual or company and their address, as well as their Australian Financial Services Licence number.

If they don’t provide you with an AFS number and you suspect a scam, you can report them to ASIC. If they do, you can check their number through ASIC’s professional registers. You can also use the register to check out details of companies.

In general, just be sure to do plenty of research before handing over your hard-earned money or your personal details, by checking out the credentials of the individual or company, carefully assessing the claims they are making, and taking your time about it all.

It also pays to talk to qualified and licensed chartered accountants or a self-managed super accountant for assistance with investments, retirement planning and superannuation, to help you secure the right types of investment according to your risk profile, the current market and your particular financial goals.

Six Things that Can Keep a Business from Growing

Small business owners might start out with a grand vision, but end up falling into day-to-day ruts, and losing their direction and view of the bigger picture. We highlight six things business owners sometimes do that can limit business growth if they are not remedied.

1. Failure to adapt to changing technologies and buyer behaviour

Businesses that fail to make use of new technologies risk missing out on a major chunk of the market, especially as buyer behaviour is shifting more towards online research and purchasing.

Examples of this includenot having a website in place, especially as a high-quality site can be an excellent marketing tool, as well as failure to utilise social media for business marketing and engagement, and not having a solid digital strategy in place.

2. Poor financial and cashflow management

Running a business successfully requires rigorous financial management in order to ensure adequate cashflow to run the enterprise, to pay wages and bills, and to remain compliant with the tax office.

Small business owners that are disorganised and that fail to put proper procedures and controls in place for bookkeeping and financial management can end up lurching from one disaster to another, and then breathing a sigh of relief that they survived another week! They may also end up paying more than they should in interest and penalties through falling behind on their accounts.

Remedying this may require renegotiating the terms on finance,and ensuring they hire people with the right skills,such as a Xero bookkeeper,to manage their accounts properly and professionally.

3. Being too busy to work on the big picture

It can be easy for small business owners to try to do it all themselves to save costs, which can end up leading to a focus on short-term results and achievements. However, delegating tasks to those who have the skills to perform them can enable the owner to get on with longer-term planning, focus on the bigger picture, and to keep an eye on the wider business landscape. This islikely to involve some letting go of control, and trusting others to do the job!

4. Not meeting customers’ needs and expectations

This can be potentially disastrous for any business! All businesses should have customers as their top priority, as without their customers they would not exist. SME owners should make it a priority to listen to their customers to find out what they really want, monitor how their needs are changing, and to always deliver on promises.

5. Thinking like an employee instead of a business owner

Running a business is a vastly different role to that of an employee. A valuable employee is concerned with providing the skills and services their employer wants, and with developing a career path.

Being a business owner on the other hand involves thinking like a strategist and steering the enterprise in the right direction. It also means keeping an eye on the bigger picture, and the external business landscape.

6. Failure to adapt to a changing workforce

The way of work is changing, and not adapting could result in losing valuable employees. These days, many workplaces are embracing remote work, cloud computing, electronic communications, part-time work and flexible hours to meet the varied needs of different generations.

Even highly successful large commercial enterprises can end up in deep water when they fail to adapt to changing business trends and customer behaviour. If this is happening in your business, consider getting professional assistance from a business accountant in Sydney to help you to regain that great vision you had in the beginning!

6 Things that Work Better in The Cloud

6 Things that Work Better in The Cloud

Financial Future Checklist

Over-40 Financial Future Checklist

Are you aged 40 or over? How hard have you thought about your
financial future? This is an excellent time for consolidation of all your hard work and assets. Try our over-40 financial security checklist, and see how you measure up. Do you….

• Have a savvy financial adviser?

Your financial adviser should be fully aware of your investment goals and be an expert in your particular investment interests. An astute adviser will help with unpicking the trends, and maximising your investment strategies. Set up regular meetings with them, and make sure to check ASIC records to ensure your chosen advisor has the right qualifications and track record.

• Have an innovative accountant?

How innovative is your accountant? Are they taking advantage of legitimate tax minimisation strategies? The ideal accountant should be a partner in wealth creation, not just managing your money but helping you to create extra revenue streams, through super fund investments for example. There are many good accounting firms in Sydney and the other capital cities that are worth examining if your current accountant doesn’t match up.

• Have a debt reduction plan?

This is crucial. Start paying cash wherever possible. Aim to keep all credit cards at zero each month. Plan to work off all other existing debts, such as mortgages, and prioritise in terms of which has the highest interest rates.

• Maintain your assets?

Once you’ve done a stocktake of your existing assets, it’s important to keep them in excellent condition. This covers everything from your house and car to any articles of high value that you’ve identified are assets unlikely to greatly depreciate.

• Have an emergency fund?

Make sure it’s stocked up and accessible. Budgeting a small amount of money each week into the fund ensures you’re covered in case of any unforeseen medical or other emergencies.

• Understand super performance?

Do you know how much money you will require in order to retire comfortably, depending on the lifestyle you want?

Make sure that you understand the investment products utilised by your super fund, and regularly monitor your account’s performance to ensure it is on track to meeting your goals.

You might also have multiple funds as a result of job-hopping in your 20s. It’s important to consolidate your super, and find the best product. This means you’re not paying fees for multiple funds, or old-style funds with inflexible investment options.

Finally, don’t discount the possibility of setting up a self managed super fund (SMSF). With the right advice and investment strategies, an SMSF can allow you to cherry-pick investment products that are tailored to suit your goals.

• Have multiple income streams for retirement?

What long-term investment products do you currently have that will be ripe for yield in twenty years? It’s also a good idea to diversify wherever possible, for instance having stock options as well as real estate. Look at what equity you can draw upon. Sometimes the modest but regular yearly turnover may be preferable to the high yielding but inconsistent product when planning for retirement.

• Have a business succession plan?

If you own a business it’s a good idea to start thinking about how it will tick over once you retire. Start thinking about a likely successor, and consolidating the business so its structure won’t be shaken up by your departure.

If you said yes to more than four of these, then you’re well on your way to being financially secure. If not, hopefully this checklist will act as a helpful guide as to where the gaps currently lie in safeguarding your future.