Planning your family’s financial future after a life-changing accident

Edward Morrison was engaged to be married and a competitive district footballer when he was paralysed in a car accident. At the age of 25 his life changed forever.

The owner-operator of a northern beaches roofing business prior to the accident, Edward was now immobilised from the waist down. Aside from the need for a long stay in hospital and an even longer rehabilitation to transition to life with a spinal cord injury, Edward was no longer able to do the work required to run his business.

The financial impact of spinal cord injury
According to the Australian Spinal Injury Alliance, Edward’s accident was typical of spinal cord injuries in Australia. Nearly half of all accidents that result in spinal cord injury result from motor vehicles, and men account for 84% of all such injuries.

Spinal cord injury has life-changing health, social and financial consequences for individuals, their families and the broader community.

Getting the right advice
Edward claimed on his green slip insurance. The process took two and a half years, but at the end of it he received an injury settlement of $1.8 million.

During that time, Edward and Sarah married. Now in their late 20’s, they wanted to start a family and plan for their financial future. Edward was particularly concerned to make sure that he would be able to support his family, so they sought the expertise of Nick Lloyd, a financial planner Edward had known socially since childhood.

The financial planner’s perspective
As well as the physical and psychological impact on Edward from his injuries, there is also a heavy burden on those who support and care for them. As a result, it’s essential to be able to make successful insurance claims.

‘When it comes to insurance payouts, we want to make sure that our clients get everything they’re entitled to,’ Nick says.

When Edward and Sarah first came to see Nick, Nick asked Edward to bring along his superannuation statements. Like most young men, Edward had worked several different part-time jobs, each with its own superannuation fund.

One day while doing the due diligence to consolidate them into one fund, Nick found that one of Edward’s old super accounts had a Total and Permanent Disability (TPD) policy on which he was eligible to claim.

‘I was able to call Edward and tell him I’d found him an extra $75,000,’ Nick recalls. ‘I remember exactly what he said: “You little beauty!”‘

When Nick went through Edward’s whole folder all the way to the back, he discovered another TPD policy that he’d rolled over to a third fund for another $75,000. It took a little more work to claim it, but Nick proved Edward had paid for the policy and the insurer paid it out.

Investing an insurance payout for income
‘When you have an investment portfolio with an income stream, you can take out income year after year regardless of what happens in the markets,’ Nick explains.

‘For Edward and Sarah it’s a process of ensuring we invest their insurance payout to generate an income stream that will support his family for the rest of their life.’

Part of Nick and Shereen’s expertise is responding to changes in superannuation rules that will affect their clients’ tax position.

Changes announced in the May 2007 budget, for example, meant that Edward’s family didn’t need their family trust any more.

‘By moving the money from the trust into their self-managed super fund, we saved them the costs of accounting and tax returns on the family trust. And we got a superior tax result because inside super the income was tax-free,’ says Nick.

Investment income not affected by the Global Financial Crisis
Edward’s insurance payouts were invested just before the GFC. But despite the global market meltdown, the investment strategy Nick and Shereen had recommended and implemented for Edward and Sarah did not change.

‘Through the GFC we were able to maintain the value of Edward and Sarah’s pension income, even as the value of their share portfolio went down,’ Nick explains. ‘We kept the focus on generating the income stream that would support the family.’

Expanding investments for a bigger family
In the decade since his payout, Edward and Sarah have done well with their investments. They were also keen on buying some US shares, and sought Nick’s help to do that. They’ve also bought two geared properties in their SMSF. Nick provided the strategic advice on setting up the right structures, arranged the lending and liaised with their solicitors and accountants to ensure everything was in order.

‘If our clients want to do something, we figure out a way to help them do it.’

‘The other thing we do is to counsel clients about what is and is not possible, investment-wise,’ says Nick. ‘Sometimes people forget that you need reliable cash flow to make certain types of investments. When you’re in pension phase, it is important that there are liquid funds available to pay pensions, you can’t have everything tied up in an illiquid investment’

The difference a financial plan makes
Nick is delighted to continue to work with Edward and Sarah after more than ten years, and to regard them as friends.

‘We’ve helped them to take away the financial stress. Despite the accident, they’ve been able to start a family and maintain a good standard of living,’ Nick says.

‘We created options for them. Whether it’s been investing in international shares or investing in the property market, it’s been about finding ways to make it happen.’

Careful planning and attention to detail are things that civil engineer Colin Masterson has always prized in his work. But he suspected a poorly designed self-managed super fund was costing him dearly, and he needed to find a good financial planner to design and implement a SMSF investment strategy.

Over the course of his long career, Colin was responsible for dams, power stations and railway lines – infrastructure that is built to last. He founded and grew a large company that project-managed complex buildings in Sydney such as the Governor Macquarie and Governor Phillip Towers, and Australia Square Tower and plaza.

Engineering his future
Ten years ago, after selling his project-management business, Colin went to a financial planner to sort out his superannuation. He had a self-managed super fund (SMSF) but suspected that it wasn’t running efficiently, or effectively for wealth creation.

An accountant had set up Colin’s SMSF, but Colin was dissatisfied.

‘I knew he was floundering – it’s not something all accountants do that well,’ he said.

As an expert in his own profession, Colin knew that he needed an accountant who was a specialist in SMSFs and a financial planner with the proper expertise to advise on the best SMSF investment strategy. But even Colin was taken aback when his first financial planner (Graham, now retired) found problems with the original SMSF that took six months to sort out.

Colin was right to trust his instinct about how well his accountant had been managing his SMSF.

SMSF investment strategy and ongoing management
Both the investment and the administrative aspects of SMSF management are critically important, but they use different skill sets. And if one aspect is missing or mishandled, you’re going to be in trouble – either with the Australian Tax Office, or in retirement, when you may not have enough super for the lifestyle you want.

Recent regulations have tried to make the distinction clearer so that individual consumers receive the best services from those who are properly qualified to provide them.

Before 30 June 2016, accountants were permitted to advise on establishing and winding up SMSFs without an Australian Financial Services (AFS) licence – and not all accountants were equipped to do so. As part of the Future of Financial Advice reforms, which were designed to improve the quality of financial advice and to build trust in financial advisers, current regulations limit what services accountants can provide to SMSFs.

SMSFs: the difference between administration and advice
Now, accountants can provide administrative services to SMSF trustees – such as the necessary paperwork for establishing a fund or a rollover – but they require an AFS licence to offer personal advice. Advice would include whether or not a client should set up an SMSF in the first place, or how suitable any individual investment is for their SMSF.

According to SuperGuide, an AFS licence differentiates administration from financial advice. Licensed financial advisers can provide personal advice tailored to your circumstances, develop an investment strategy aligned with your goals, and recommend specific investment products and services for your SMSF.

Finding a qualified financial planner
Colin met his current financial planner, Nick Lloyd of ITL Financial Planning, ten years ago when he was working for Graham. Nick began assisting Colin with research for direct share investment. As Graham transitioned to retirement, Nick gradually took over management of Colin’s SMSF and super investment strategy.

‘I like the arrangement Nick has now,’ Colin said. ‘He does the super stuff himself, and uses The Brian Group for the accounting and auditing side of the SMSF.

‘I think the way Nick has handled his business has been very well done. I like him because you can go in and talk, or talk to him on the phone. You ring him and unless he’s in a meeting, he’ll ring you back within ten minutes. Or he drops things off, he lives not far away from me on the northern beaches. It works very well.’

Don’t be afraid to ask questions
Colin was nervous about the changes to superannuation rules coming into effect on 1 July 2017. ‘It was not a nice surprise,’ he said. ‘I was keen to find out what the effect of them would be.’

Part of Nick’s service is regular communication about regulatory changes affecting his clients. In an email about the changes to super, one phrase rattled Colin: ‘commutation request’.

‘I rang him up and said, “What does this word really mean?’

‘It sounds like something to do with maths and computers, but it’s not. All it means is to convert some of your super income stream into a super lump sum.

‘Nick is quite happy to explain things when I don’t understand something. I don’t necessarily ask technical questions,’ says Colin. ‘I just ask questions when I don’t understand.’

The long-term value of good design
Colin’s business success reflects his understanding of the value of good professional advice and long-term planning.

This year he is wrapping up work with consulting clients the Sydney Opera House and pricewaterhousecoopers. PwC was his client for 30 years. And in May, Colin joined his former colleagues to celebrate the 50th anniversary of the completion of Australia Square. Since the company Colin was an employee of built it, the tower has operated at almost 100% occupancy. This is a testament to good planning and attention to detail by Colin and his colleagues.

With a satisfying career behind him, and a high-performing SMSF investment strategy securely in place, Colin is enjoying the other thing he values – his grandchildren.

‘There are certain points in life when you come to a crossroads,’ says Elizabeth Hutchings, recalling how she and her husband David decided to seek financial planning advice for the transition to retirement.

In their case, the crossroads arrived when David realised that, after more than 20 years, the time was coming to sell his logistics business but he wasn’t ready to retire. While they had always ploughed money from the business into their mortgage and ‘had a good handle on it,’ they were unsure that the retirement strategy they’d always had in mind was still the right one. And before they retired, Elizabeth wanted David to have the freedom to choose what he wanted to do next.

Focused on real estate
‘We’d always made money on real estate,’ Elizabeth says. ‘Before seeing a financial planner, we had planned to buy the place we’d like to retire in – a unit by the beach – via a self-managed super fund, then rent it out while we sold our home, and bought and upgraded another one to live in.’

But when they started thinking about their age – David is 52, and Elizabeth a few years younger – they realised that the financial pressures of selling one house and renovating another could prove too much. And even though our house is worth about $2.5 million, the stamp duty on a new house is ridiculous.

‘We were also aware of potential changes to negative gearing’.

Health an issue
The other trigger for the couple to seek financial advice was Elizabeth’s health.

‘Four years ago I was very ill with cancer,’ she explains. ‘Because of that, no one will insure me.’

It was time for expert advice on how to maximise their insurance position, given their circumstances.

Looking at the big financial picture
After having their heads down for years, building their business, raising their two teenage sons, and surviving Elizabeth’s cancer diagnosis and treatment, the time had come to step back and consider the big picture. How each element – superannuation, insurance, retirement – contributed one part to a larger picture of their financial future.

Fears about financial planning unfounded
Prior to meeting financial planners Nick Lloyd and Shereen Churchill of ITL Financial Planning through a trusted friend, Elizabeth imagined that talking to financial planners meant that she and David would have to change their lifestyle.

‘I was really worried that they were going to say to us, oh you have to tighten the purse strings, you can’t go out for dinner or take holidays.

‘But we don’t have to. They can help us achieve our goals with clever strategies. It’s a real reassurance.’

Diversification is the key
Elizabeth and David didn’t have enough money in super, and were thinking of buying property through a self-managed super fund. But Nick Lloyd, Principal of ITL Financial Planning, could see that the couple didn’t have enough liquidity.

‘You can’t sell off one room of an investment house,’ Nick says. ‘In this case, Elizabeth and David needed their assets to be more liquid so they could access money if and when they need to.’

Having filled out a questionnaire assessing the couple’s tolerance for risk, financial goals and time frame for investment, Nick and his business partner Shereen Churchill were able to recommend Elizabeth and David rollover their super into a super fund that provides greater choice of assets and greater transparency over what they were invested in. Because Elizabeth and David had a longer time frame to invest their super, they were willing to take on more risk with their super in search of a higher return. They also invested some money from the business into a separate investment account. Because there was a need for this money in the short term, they chose to take on less risk.

Statement of advice
Elizabeth was ‘blown away’ when she saw Nick and Shereen’s statement of advice. ‘It was nearly 60 pages long,’ she recalls. ‘The amount of thought and work that went into it was extraordinary. We had worried we weren’t as wealthy as some of their other clients, but we could see that they treated us the same as they would have for a client with ten times our assets.’

Insurance solution
David already had income-protection insurance through the business, but the couple thought insuring Elizabeth, given her previous condition, would prove impossible. So they were amazed to learn that Nick and Shereen had found a way to maintain Elizabeth’s eligibility for a policy she didn’t even know she had.

‘Basically Nick and Shereen found a way to secure our future,’ Elizabeth said.

Financial planners sometimes get a bad rap for chasing commissions for their own sake, but after analysing David’s income-protection insurance policy, they recommended he stay with his current provider but take out a new policy with a higher sum insured, improved definitions but also a significant reduction in premium.

‘They have a real understanding of the need for insurance, but also how each policy works from the point of view of a small business owner,’ Elizabeth said.

Acting quickly for an immediate tax saving
After Elizabeth and David signed the statement of advice, Nick and Shereen implemented their recommendations immediately, putting Elizabeth and David’s money into super before 30 June when the rules changed.

‘Between the time we signed the statement of advice, and the end of the financial year, they had saved us $16,000.’

Health and happiness
Now that they’re on a secure financial footing, and to celebrate Elizabeth’s health, the family is planning a white Christmas in New York this year.

‘Nick and Shereen are very genuine,’ Elizabeth says. ‘We never felt pressured. When it’s your own money, it’s hard to see the big picture, but that’s what a good financial planner does for you.’

If you’re thinking of changing financial planners, you’re not alone. A 2015 survey of Australian financial planners conducted by Business Health showed that 23% of existing clients become disengaged in less than three years; 35% of clients take somewhere between three and seven years to feel the same way; and after seven years, a whopping 42% of clients want a change.

Despite a relatively high degree of client turnover, there’s little hard data on the main reasons why people decide to leave their financial planner, though poor communication, high fees and underperformance seem to be three key factors that influence a decision to try someone new.

CHRISTINE AND ROBERT’S STORY

Two of those reasons – poor communication and high fees – were more than enough for Christine Brown and her husband Robert to leave their financial planner. They were loyal clients, having been with their adviser for ten years. But over that time, their initially good relationship had soured.

TAKEN FOR GRANTED

“We’ve always run small businesses and have always been hands on, and we like to work with people like that,” Christine says.

“I wasn’t happy with our former financial planner, because I thought they’d become a bit complacent. The person we first engaged and had the relationship with palmed us off on to someone else and was suddenly too busy for us.

“The communication was not to our liking. And the fees were astronomical.

“I was pretty dark on them for three to five years and suggested we look for someone else. Robert felt some loyalty and thought it would be too hard to change. We were busy, so we left it.”

COMMUNICATION AND TRUST

One of the most common complaints people make about their financial adviser is that they don’t listen.

“We considered our former adviser a friend,” Christine says, remembering how frustrated she and her husband became with the company.

“We gave him plenty of hints along the way about how he was not involved the way they wanted him to be, and that he’d lose us because of poor communication. He wasn’t listening.”

AN OPPORTUNITY TO CHANGE FINANCIAL ADVISERS

Last year, Christine’s husband Robert bumped into Nick Lloyd of ITL FP at a business event. Not long after that, they went for a no-obligation chat with Nick and his fellow financial planner Shereen Churchill.

“They were so down to earth, we liked them straight away,” Christine says. “They are a small business; they felt grounded. They were real people, not people in suits.”

BREAKING UP WITH YOUR FINANCIAL PLANNER IS NOT HARD TO DO

Once Robert and Christine made the decision to change financial planners, the transition process got underway.

Many couples baulk at the prospect of a series of complicated steps, imagining an enormous hassle of having to change accounts, unmake existing arrangements, then make new ones, and perhaps have to learn to use a new website or wealth-management platform. But Robert and Christine’s experience was the complete opposite.

“Honest to goodness, it couldn’t have been easier,” Christine said. “It was like handing the baton over and letting them run with it.

“Nick and Shereen were so attentive. They literally took away all the pain we anticipated from it. They gave us clear instructions as to what we had to do. It was pretty straightforward to fill out forms and share confidential information.

“After a few weeks we went back into the office. Nick and Shereen put aside two hours and went through what their recommendations were, their strategic plan for us, and recommendations for the future and where they thought we should invest.

“And the fees halved overnight.”

GREAT COMMUNICATION

The 2014 Future of Financial Advice (FOFA) legislation requires advice providers to renew their clients’ agreement to ongoing fees every two years. But sticking to the letter of the law is the bare minimum of client communication. Making client communication a priority – whether it’s about fees or portfolio or changing life circumstances – reflects the culture of the business.

“Nick and Shereen are communicating with us all the time,” Christine said. “For example when the budget came out, by the end of the day we had an email from them with recommendations as to what we needed to do,” Christine said.

“We’re not the easiest clients because our portfolios are complicated and we often act spontaneously. Nick and Shereen are so responsive and can handle our last-minute requests for advice. The other crowd was taking up to two weeks to get back to us.”

NORTHERN BEACHES LOCATION HANDY BUT NOT CRITICAL

ITL FP’s Belrose location suits Christine and Robert, who live on the Northern Beaches, but it wasn’t a factor in their decision to become a client of the firm.

“We needed to find someone we trusted because it’s our livelihood they’re looking after,” Christine said. “We were looking for the relationship. It didn’t matter about location.”

SAILING TOWARD THE HORIZON

Now in their fifties, Christine and Robert enjoy sailing with their two teenage children when they’re not working on their business interests.

While it’s still many years before they’ll think about retiring, Christine dreams about travelling when she has time to spare.

“The top of my bucket list is go to Tuscany and just ignore the world for a month and paint and cook.”

Written by Shereen Churchill (Financial Adviser)

On 9 May 2017, the Turnbull Government delivered the 2017/18 Federal Budget which focused on health, home and housing.

From a pure financial planning and wealth perspective, the positive news is that the changes are minimal. This is a very welcome outcome given the significant changes, particularly to superannuation, that were announced in last year’s Budget which are still largely due to come into effect from 1 July 2017 (refer to our end of financial year planning blogs for further info).

It’s important to understand that these proposals are just announcements and the final form may differ when they ultimately become law.

Self-Funded Retirees

It may be time for you to consider downsizing

We know that many of our self-funded retiree clients have been considering the option of downsizing their home. However, with the restrictions on contributing to superannuation, there hasn’t been much of a financial incentive…until now.

To increase housing stock, the Government is encouraging older Australians, aged 65 or more, to downsize their properties by allowing them, from 1 July 2018, to make a non-concessional contribution of up to $300,000 per individual into their superannuation fund from the proceeds of the sale of their principal home which they have owned for more than 10 years.

Importantly, the normal super contribution rules such as ‘work test’ requirements that currently apply to those aged 65 or older will not apply to these contributions, and they can also be made by those with more than $1.6 million of total superannuation and those who have already used up existing contribution caps. However, consideration needs to be given to the impact on any existing Age Pension entitlements.

Returning Concessions to Self-funded Retirees impacted by Centrelink’s 1 Jan 2017 changes

Some of our clients lost their pensioner concession card when the pension assets test change introduced on 1 Jan 2017– the good news is you will be getting the card back along with all the concessions that come with this.

Professional Families

It may be time for you or your kids to take an interest in super

Our younger clients and many of our clients with young adult kids come to us for advice about helping themselves or their kids get onto the property ladder. It may be time for you or your kids to take an interest in super to boost your first home deposit.

To help first home buyers get ‘into the game’, they will be able to save for a deposit by making additional voluntary contributions into their superannuation account from 1 July 2017. The First Home Super Savers Scheme will enable access to the tax advantages of superannuation with pre-tax contributions and earnings taxed at 15%, rather than marginal rates, and on withdrawal taxed at their relevant marginal rate, less a 30% offset. These voluntary contributions plus their deemed earnings can be accessed from 1 July 2018.

Savers will not have to set up a new account, they can just use their existing super account while contributions will be limited to $30,000 per person in total and $15,000 a year. The contributions made will be counted under the relevant contributions caps so it is important to note caps are reducing from 1 July. The concessional contribution cap will reduce to $25,000 per annum per person and the non concessional contribution cap will reduce to $100,000 per annum per person or $300,000 if you are eligible under the bring forward rules.

Tax break for high income earners

From 1 July 2017, our clients with taxable income in excess of $180,000 per annum will no longer have to pay the 2% temporary budget repair levy. After taking into account the increase in Medicare Levy, means that income tax plus medicare levy at the higher band will reduce overall by 2% until 1 July 2019 then a 1.5% thereafter.

Education and childcare also rated mentions; university fees will rise by 7.5% by 2021 and childcare rebates will be means tested.

Successful Business Owners

For small business owners, the $20,000 write off on capital expenditure that was due to end on June 30, 2017 will continue for another year.

You may also be interested in the cessation of the temporary budget repair levy which is essentially a tax break for high income earners. Refer to the “Professional Families” section for further detail.

All Clients

To ensure all Australians can continue to access timely and affordable healthcare, the Government announced that it will set up the Medicare Guarantee Fund to pay for all expenses on the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme (PBS). The revenue raised from the Medicare Levy will be credited to this fund (excluding amounts to fund the National Disability Insurance Scheme (NDIS)).

To fully fund the NDIS, the Medicare levy will be increased by 0.5% to 2.5% from 1 July 2019.

Concluding thoughts

Overall, the number of changes announced in this year’s Federal Budget are small compared to prior years. For many, this is important as it allows a continued focus on the significant changes to superannuation which take effect from 1 July 2017. With regards to this, we will be writing to all affected clients in the coming weeks.

This information has been prepared and issued by ITL Financial Planning and is current as at 10 May 2017. Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. ITL Financial Planning does not accept responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change or further refinement.

Written by Shereen Churchill (Financial Adviser)

We’re big advocates of the benefits of continually reviewing your situation to make sure you’re making the most of the available opportunities each year. The 30th of June is a key date as it signals the end of a financial year and the beginning of the next.

The importance of making the most of the opportunities prior to 30^th June this year is more important than ever. This is because in the 2016 Federal Budget, the Government announced proposals to be introduced in July 2017 which will result in the greatest change to the superannuation system in a decade. These proposals have now been finalised and entered into law.

There are contribution rules and penalties for getting things wrong, so we always recommend getting personal financial advice based on your personal circumstances and objectives.

Here are 10 ideas that we will be considering with our clients this end of financial year:

If you have more than $1.6m in super, this financial year might be your last opportunity to make a non-concessional contribution. If you are close to $1.6m, it could be worth bringing forward contributions.
If you are a retiree with a pension over $1.6M, take action before 1 July to remain compliant with the new rules. Before your fund’s 2017 tax return is lodged, you need to have made your election whether you want to take up the transitional CGT relief. There is no one-size fits all strategy for this complex change and therefore needs to be considered on a fund by fund basis.
If you have an existing transition to retirement income stream (TRIS), consider the viability of continuing the TRIS given the loss of the tax-exempt treatment and the reduction in the concessional cap. Also give consideration to your eligibility to commence a retirement phase pension to retain the tax-exempt status.
If you have a combination of a defined benefit pension and retirement phase pension, your super potentially faces being wholly or partially wound back from July 1 to a taxable accumulation account as a result of the pension transfer rule. Refer to points 1 and 2.
If you have an existing salary sacrifice arrangement in place giving you total concessional contributions over $25,000 per annum, make plans to reduce your salary sacrifice arrangements from 1 July to ensure you don’t exceed the new lower cap. Given the change that enables everyone to make personal concessional contributions next year, you might want to consider cancelling it entirely.
If you are self-employed or have significant investment income or capital gains (ie; less than 10% of your income comes from being an employee), consider claiming a personal tax deduction for super contributions up to the relevant concessional contribution cap. Contribution caps are a use it or lose it opportunity so don’t miss out on saving up to 34% tax.
If you have excess savings or investments that you don’t need access to before retirement, consider transferring this wealth into super. This may reduce tax paid in your personal name and build your wealth for retirement.
If your taxable income is less than $51,021 and more than 10% of this came from working, consider making a personal after-tax contribution to super. This may qualify you for a government-contribution of up to $500.
If your spouse earns less than $13,800, consider making an after-tax contribution on behalf of your spouse. This will boost your partner’s super and reduce your tax. You may receive a tax offset of up to $540.
If your spouse has less super than you, consider splitting up to 85% of a financial year’s ‘taxed splittable contributions’ with your spouse. This will help to even up your member balances or fund your spouse’s insurance premiums (if insurance is held inside their super fund).

Whilst these ideas might get you thinking, it is important to consider the appropriateness of the strategy in line with your full situation and objectives. Contact us to find out how these ideas can work for you now and in the future.

Are you a self-funded retiree with more than $1.6 million in superannuation?

The biggest changes to super in ten years come into effect on 1 July. Time’s running out to take advantage of this tax-effective window.

Changes to super on the horizon

In 2017, the end of financial year looms larger than ever for self-funded retirees and high net worth individuals. That’s because many of the changes to superannuation the Government announced last year come into effect on 1 July. The changes affect self-funded retirees as well as those still working towards retirement.

More than $1.6 million in a pension?

If you have more than $1.6 million in a pension after 30 June, you need to be aware of a few things:

Currently, the earnings on your pension assets (like shares, cash, or rental income) are tax-free. After 1 July, there will be a limit of $1.6 million eligible for the tax-free concession.
If you have more than $1.6 million in a pension, you need to take action to reduce your pension under $1.6 million or suffer the consequences of becoming non-complying. Non-compliance may lead to tax of 45% on the Fund’s assets and harsh admin penalties (proposed to be $12,600 per trustee from 2017/18).

To help you transition into the new rules, the ATO is giving you a last minute opportunity to obtain capital gain tax relief. This is especially important for funds sitting on large unrealised gains. However, you need to consider whether taking up the relief if appropriate for you (its a complex strategy and no one-size fits all) and if so, make the election before the Fund lodges its 2017 tax return.

And there are new rules about the tax treatment of income inside your transition-to-retirement income stream. You could find yourself taxed 15% on income you had assumed would be tax-free.

More than $1.6 million in super?

If you have more than $1.6 million in super (in accumulation or pension phase) after 30 June, you need to be aware that after 1 July, you will no longer be able to make after-tax contributions to your super (pending the Federal Budget proposal to allow those over 65 to contribute some of the proceeds from downsizing their home). Therefore, if you have recently sold an investment property, received an inheritance or have some other investments outside super, you may want to consider contributing this into super before 30 June.

Don’t have $1.6 million in super yet?

If you have less than $1.6 million in super, the good news is that you may still be able to contribute to superannuation after 30 June. The bad news? The super contributions caps are reducing significantly. This means you may be able to get an extra $240,000 into super this year when compared to after 1 July. Given super is the most tax-effective environment for your retirement savings (0% tax in pension phase) you shouldn’t put off deciding what to do with any cash and assets you’ve got outside super.

Life’s too short to spend it studying the new super rules

“Our existing clients know that we’ve got things under control, to ensure everything that needs to be done, will be done in time.” Financial adviser, Nick Lloyd of ITL Financial Planning said. “Our clients have been concerned about whether their friends and family understand the changes so we’ve been meeting with them. We have found that most weren’t aware of the new legislation. They were too busy enjoying life to realise how much tax they might be forced to pay if they didn’t act fast. Lots of people think, I’ll deal with it when I do my taxes. But if you wait until you do your tax return, it will be too late,” Nick said.
Brian’s case

Brian S. is retired and after selling his business some years ago has a super balance well in excess of $2,000,000. He and his wife Laura live in St Ives and enjoy spending time with their grown up children and three grandchildren and travelling overseas. As an ex-business man, Brian has always managed his own super fund and felt he had this under control.

“I was playing golf with George (one of Nick’s clients) when he asked me if I knew I’d pay big tax if I didn’t take action,” Brian said. “The last thing I wanted to think about was my super. But I gave Nick a call and booked an appointment. Without Nick’s advice, I wouldn’t have known that I was looking at a big excess in my pension account come 1 July – or that Nick had a solution to minimise the tax Laura and I would be hit with.
“That would have been a rude shock at tax time. It would have been enough to make us think twice about whether to travel to Europe this year or next. Which is not something you want to give up when you’ve worked so hard for so many years.
“Now we can go off on holiday feeling good that we have the best strategy for our super, and we won’t be taxed more than we must.”
Nick Lloyd said that Brian’s case is typical. “Many successful business owners and professional people whether still working or retired, feel confident managing their own investments, but the devil’s in the details. My concern is whether others in similar situations to Brian are familiar enough with all the changes to know the different strategies they can use to their best advantage.
“One big area of immediate concern that I can see is unrealised capital gains in your super,” says Nick. “What’s the best way for someone to deal with them, given the changes to super?”
Fortunately, Nick and his team at ITL Financial Planning have been studying the legislation since the changes were announced in 2016, and have been able to implement customised strategies for each client.

Contact Nick Lloyd or Shereen Churchill at ITL Financial Planning to discuss the best strategy for your circumstances.

Ready to retire

Are you ready to retire but wondering if you can afford to live without your regular paycheck? Or are you already retired, but finding your investments aren’t generating enough income to live? Or maybe managing your own SMSF is too much work?

At ITL Financial Planning we can help you prepare for and enjoy your retirement by putting proactive strategies, structures and investments in place now. Proactive strategies, structures and investments that enable you to:

maximise your chance of maintaining your lifestyle in retirement;
optimise the resources you have now; and
sleep peacefully at night, knowing your money is in safe hands.

‘Sleep at night’ factor

Planning for retirement can be incredibly challenging for many retirees. In recent years, retirees have suffered from returns on conservative investments like cash and term deposits halving. At ITL Financial Planning we understand that every client has a different level of risk they feel comfortable with, and different objectives which require a certain level of return.

Which is why we tailor your retirement plan and investments based on your ‘sleep at night’ factor.

We want to maximise your return at an acceptable, and understood, level of risk.

Because being able to sleep at night is crucial to your long-term peace of mind.

What does your retirement look like?

Everybody’s idea of the perfect retirement is different, which is why it’s so important to have a financial plan that is tailored to your specific goals.

Regardless of whether you want to spend more time with your family, cruise around the world, potter in your garden or have a complete sea change, we take the time to sit and talk with you, to listen and fully understand the type of future you envisage and what is important to you.

Our process always starts with a conversation, asking the questions that provide clarity around your current situation and future objectives. We then do the work to determine:

Is your planned retirement affordable and sustainable?
Can we reduce the amount of tax you pay (or increase your refunds)?
Is there a plan in place to fund any big ticket items or trips?
How can we maximise any Centrelink benefits or concessions
Are there contingencies for unexpected events, such as health problems ?
Is your estate planning in order, ensuring your family is protected and looked after?
Is your money working for you and generating enough income to live on?

We then tailor a bespoke financial plan for you, a plan that optimises your existing and future resources, based on your ‘sleep at night factor’ and what you want to achieve.

But we don’t stop there. As your circumstances and government rules change, we continue to ensure your plan still works for you, delivering the best possible outcome for your age and stage of life.

We’re available when you want to talk

Whether your retirement is still a long way off, just around the corner, or already started, let’s start the conversation now.

Because the earlier you start to plan for the future, the better your chances are of securing the retirement you’ve always dreamed of.

We’re available when you want to talk, contact us now.

Congratulations!

Whether you’re expecting your first child or adding to your existing brood, the arrival of every new baby brings anticipation, hope and so much love.

But as every parent knows, your tiny bundle of joy will also have an enormous impact on your family’s financial situation… both now and in the future.

It’s never too late to make positive changes

Maybe you’re just thinking about trying to start your own family, but unsure how you’ll cope on one income?

Or perhaps your family is already growing faster than you’d anticipated and suddenly you need a bigger car or maybe even a bigger house?

Wherever you are at on your journey of life we can help you make smart financial choices that will enable you to protect and provide for your family.

Help with things you need and things you didn’t know you needed

When a little one is one the way, you’re right to be concerned about:

What your additional costs will be
How your family with manage on a reduced income
Your paternal and maternal leave entitlements
Whether you will need a bigger car or even a larger family home
How to start saving for your children’s education

But did you realise that there are some other important financial changes that you can implement to help your family both now, in the future…and even after you’ve gone?

You can ensure your family will always be provided for by having the right insurance in place.

And you can ensure your family will always be protected with careful and considered estate planning, updating or creating a will and legally nominating guardians for your children. At ITL Financial Planning we can help you protect and provide for your precious ones.

Let’s have a chat today about how smart financial choices can help you achieve peace of mind.

If you’ve received a large sum of money, either as an inheritance or if you’ve been the lucky recipient of a windfall, smart strategies and investment decisions made now can enable you to maximise the return on your good fortune for years to come.

We can work with you to ensure it makes a lasting difference, rather than just being provided with a short-term bonus.

Put your money in safe hands

When you’re not experienced in handling large sums of money, it can be very tempting to overspend or make ill-advised investment decisions you may come to regret later.

Having a plan in place ensures make it all count.

But if you want your money to last, it really makes financial sense to talk to a trusted financial adviser who:

has an outstanding track record of investing wisely
takes the time to understand your short-term and long-term goals
specialises in estate planning, so you can provide for your loved ones and ensure your money remains within your bloodline
can help you minimise your tax burden
can advise you on different investment options, according to the level of risk you feel comfortable with
is always available to answer any questions you may have

Grow and secure your financial future

Did you know that investing in the right financial advice actually saves you money, both in the short and the long term?

At ITL Financial Planning we work with many clients, just like you, to secure their financial future through effective wealth management.

We have a track record of being transparent, reliable and trustworthy and we will securely manage your finances just like we would manage our own.

We will help you protect, invest and grow your newfound wealth, ensuring you can enjoy your money today, but also ensure your future tomorrow.

If you want to enjoy your inheritance or windfall, without it becoming a burden, talk to us today about how we can ensure your good fortune continues to deliver to you and your family for many years to come.