Release authority payments

Fairer taxation of excess concessional contributions (FTECC) and refund of non-concessional contributions (RENCC)

We have issued release authority statements to SMSFs with members who have made excess contributions. Some SMSFs are not meeting their obligations with the authority to release excess concessional contributions or non-concessional contributions.

You need to pay particular attention to the direction provided in the ATO release authority letter to make sure you’re not incorrectly releasing excess contributions from member accounts directly to individuals directly when the payment should be made to us. If you have made an incorrect payment you will be required to take recovery action to rectify the error.

To help:

  • FTECC-release authority: excess contributions to be paid to us within 7 days of the authority letter issue date and return the completed release authority statement (Nat 71885) to us.
  • RENCC-release authority: excess contributions to be paid to the member within 21 days of the authority letter issue date and the completed release authority statement (Nat 71885) returned to us.

Further information is available on the ATO website at Release authorities

This information has been provided for information purposes only.  You should not rely solely on this information when making any investment or tax driven decision.  Please refer to the ATO website for full details of the article and obtain advice tailored to your individual financial needs and objectives, from a professional adviser authorised to provide personal investment and taxation advice.  The ATO copyright disclaimer states: You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Neither the ATO nor the Commonwealth has endorsed us, or any of the services or products we offer.

Inaction, the worst possible action

The XJO traded with a 52 week high this year of 5996.9 in March 2015, a low of 4918.4 at the end of September 2015. It closed yesterday at 5102, 3.73% above the low. This is a fall of just under 15% off the high, which has seen billions wiped off investor’s portfolios. This can be attributed to the recapitalisation of the big four banks and the commodities rout we’ve seen this year.

The house view since the start of 2015 has been that the banks have had decreasing returns on equity and were overpriced. A great opportunity to exit these names was post the interest rate reduction in February this year, which saw the Commonwealth Bank hit a high of $96.69.

We have been exiting out of the materials sector for the last 18 months, which has proved beneficial for client portfolios.

Major volatility has been seen this year due to the Greece impasse and the volatility on the Shanghai Stock Exchange. Concerns around the slowing growth in China caused Black Monday August 2015, which saw the Dow Jones Fall 1089 points to 15,370.33 as soon as the market opened. Larger cash balances in client portfolios have shielded client portfolios to an extent during this correction.

Portfolios during the GFC lost significant amounts due to the only strategy investors employ is that they will come back and they are holding onto stocks for the 4-5% cash dividends, while they lost 20-30% in market values. Our view is that if there is an avalanche, there is no point being on the mountain.

We will still take positions in companies we feel have significant upside, for example during reporting season. If we believe a company will report well and exceed market expectations, we will take a position. If the company does report well and rallies following the report, we will take the profit during volatile periods and we have had a positive reception from clients in relation to this strategy.

Thus, the worst thing to do during massive volatility is to leave your computer turned off.

Written by Alex Perry, Senior Adviser at Atlantic Pacific Securities (APSEC)

Portfolio health check

Written by ASPEC’s Senior Adviser, Anthony D’Paul

Is your portfolio ugly? We have a model portfolio that turns heads!

Creating a portfolio that looks good in today’s market conditions is an art that takes years of practice. Getting it correct will allow you to attract a lot of attention and you’ll be envied by most. Get it wrong and someone else will bring home the prize.

On Wednesday, the Federal Reserve increased in interest rates in America. What are you going to do to take advantage of this macro event? How committed are you to putting your portfolio in a healthy position?

We have carefully constructed a model portfolio that should help you stand out from the rest of the competition. The benefits of our model portfolio include:

  • diversification;
  • healthy yield potential;
  • general guidelines around percentage allocations within the portfolio;
  • contains a range across large, medium, and small cap stocks;
  • affords you the opportunity to benefit from the upcoming reporting season and the potential increase in interest rates in America; and
  • it tracks the portfolio’s beta relative to the market, and includes stock commentary.
  • For a limited time only we are offering you a free copy of this model portfolio.
    Reporting season is here, why wait, register for your free copy today

    portfolio

    Would you like a complimentary copy of this sample portfolio?
    REGISTER YOUR DETAILS HERE
    http://www.australianstockreport.com.au/portfolio-health-check/

Volatility is opportunity: it’s all about how you look at it.

The ASX/200 started the year at 5,345 and hit a high of 5,996 on 3 March 2015 – if you had sold on this day you would have secured a gain of +10.32%. Contrarily, if you had sold at the low on 29 September 2015 at 4,918 you would have made a loss of -7.98% for the year.If you invested in an ASX200 index linked fund between 2 January 2015 and 2 December 2015, you would be down -3.3% year to date (excluding fees, tax and dividends).

The ASX200 has had a range of 18.3% for the year and depending on how well you managed risk, captured volatility and positioned your portfolio, you are either up, down or flat / down if you continue to hold.

Over the year we have had numerous macroeconomic events that have triggered extreme volatility in different segments of the market, including:

  • sustained slowing of growth in the world’s two largest economies causing oil to tumble into its longest ever bear market (falling for 337 trading days and declining 57.6% leading WPL & STO to -24% & -40% returns)
  • 50% decline in Chinese GDP from 12% in 2010 to 6.9%, leading to falls in commodities such as Iron Ore (-41%), Copper (-56%) and Coal (-25%) and impacting commodity producers such as FMG (-30.58%), BHP (-38.78%) and RIO (-22.91%) since January.

What macroeconomic themes will play out in 2016 and how will you position accordingly to take advantage of them?
Are you aware of the December 15/16 Federal Open Market Committee meeting and the likely impacts on global equity markets and currencies in the near term and how ASX-listed businesses may be impacted? How do you plan on minimising your downside risk? Will you capture the volatility by using short strategies?

Join us for a short webinar at 6.30pm on Tuesday 22nd December, where we’ll answer these questions and more.

Mark Lennox, head trader at HC Securities will explain:

  • How to capture volatility using derivatives
  • How to manage your downside risk with proper capital/risk management strategies
  • How to utilise our advisers decades worth of experience in your own portfolio

REGISTER YOUR DETAILS HERE
http://www.australianstockreport.com.au/webinar-registration/

China – Hard or Soft

 

Two months ago, as Chinese markets fell off a cliff, Australian Stock Report published an article highlighting why the selloff in China should not to be compared to the 1929 crash in America.

In the time that has since passed we’ve learnt a lot more about what is happening in the Chinese economy….and whilst another Great Depression is unlikely, the signs aren’t particularly healthy.

Growth in China’s investment and factory output in August came in below forecasts, a further indication that the world’s second-largest economy is losing steam.

Factory output grew by 6.1% from the year before – below forecasts of 6.4%.

Growth in fixed-asset investment – largely property – slowed to 10.9% for the year-to-date, a 15-year low.

Growing evidence that the world’s economic powerhouse is slowing down has caused major investment market falls of late.

Other indications that the economy is weakening can be seen in falling car sales and lower imports and inflation.

Chinese manufacturers cut prices at their fastest pace in six years, largely on the back of a drop in commodity prices, which have dropped sharply over the past year as demand from China faltered.

25-year low

Last week, the Chinese Premier, Li Keqiang, said China remained on track to meet all its economic targets for this year despite the economic data.

China has already cut interest rates five times since November to encourage lending and spur economic activity, along with other measures to boost growth.

Premier Li pledged that China would take more steps to boost domestic demand and that it would implement more policies designed to lift imports.

China recently revised down its 2014 growth figures from 7.4% to 7.3% – its weakest showing in nearly 25 years.

Meanwhile, the Chinese authorities said they would take new steps towards a more market-based economic system by offering shares in state-owned businesses to private investors.

The move, which they said would help improve corporate governance and asset management, is planned to take place before 2020.

What lies ahead?

When Chinese Premier Li Keqiang sought to reassure business leaders that the world’s second-largest economy can avoid a hard landing, he acknowledged mounting fears of exactly that, and it appears increasingly likely that the adjustment to slower growth will be painful.

Just six months ago Li set a 2015 economic growth target of “around seven percent”, confidently telling lawmakers that the economy was adjusting to a “new normal”.

But he scrambled to reassure a World Economic Forum meeting last week that China was not heading for a disorderly slump which would shake the global economy.

“If there are signs the economy is sliding out of the proper range we have adequate capability to deal with the situation,” he said. “The Chinese economy will not head for a hard landing.”

Still, gloomy perceptions of China are growing and the signs are troubling: a surprise currency devaluation, persistently weak manufacturing, and rising debt defaults, with a share price collapse to boot.

Government meddling in the stock and currency markets, including police investigations, as well as falling back on pump-priming to support the flagging economy, have raised questions about the leadership’s management and commitment to reforms.

It appears that nothing is working for Chinese leaders at the moment. They can slow the rate of descent, but they can’t change the downward direction of their economy.

China’s technocrats are not providing any confidence to the market at the moment and their next steps will be crucial for the global economy.

Aussie Dollar Outlook

 

There has been a lot of discussion about the Aussie dollar of late, with many forecasters recently cutting their outlooks for the local unit.

Earlier this month, Westpac cut their end-of-year outlook to 66 U.S. cents, down from an earlier forecast of 70 U.S. cents.

Even more bearish is ANZ which just last week suggested that, under the right circumstances, the Aussie could fall below 60 U.S. cents.

That joined a call from AMP, with chief economist Shane Oliver declaring that it’s “on its way to 60 cents”.

It seems that everyone has a prediction.

But what are the drivers that will see the Aussie plunge to these levels and what are the catalysts that could prevent such falls or see the AUD actually move higher?

Few would have thought a year ago the Australian dollar, which was around five cents from parity, would presently be trading around US70¢.

The local currency has been sliding steadily for a year now, a trend that accelerated in the last few months as China’s slowing growth hit key Australian exports such as iron ore and coal.

The catalyst was a flood of concerns around China’s flagging economy and the related slump in the Chinese sharemarket, which raised significant questions about the country’s demand for our key commodities such as iron ore, which makes up $1 in every $5 of Australian exports.

The falling dollar, at least more recently, has largely been in response to concerns about China, global growth and the resultant demand for commodities.

If China continues to slow at a pace faster than expected, which is a very possible outcome, and global growth continues to slow, another very possible outcome, then the Aussie dollar should, in theory, continue to slide.

So when’s the dollar likely to turn higher?

In order for that to happen, we would need to see improvement in both the local and the regional economy.

Typically, a turning point in the currency comes when the fundamental backdrop is favourable and when Australian assets are trading at a discount to global assets. At the moment they are still at a premium.

Given that the above conditions need to be present and that they won’t likely be for a while, and that the U.S. Fed is about to embark upon a monetary tightening program which will support the greenback, the local unit isn’t likely to rally significantly anytime soon.

Fair value for the AUDUSD into the first half of next year probably sits around the 65-70c region.

From the ATO – Rise in the preservation age

 

Before an SMSF starts paying a transition to retirement income stream (TRIS) to a member, the member must have reached their preservation age. This is the minimum age that a member can access their preserved super benefits without satisfying another condition of release.

From 1 July 2015 the legislated rise in the preservation age comes into effect. If a member turned 55 before 1 July 2015, they qualified for a TRIS and the change in preservation age won’t affect them. However, this age is now based on the member’s date of birth.

A member who turns 55 between July 1 2015 and 30 June 2016 cannot start a TRIS during the 2015-16 financial year. If born between 1 July 1960 and 30 June 1961 the earliest you can elect to start a TRIS is during the 2016-17 financial year.

The preservation age continues to rise until it reaches 60. For members born from 1 July 1960 to 30 June 1961 the age is 56. If born between:

  • 1 July 1961 and 30 June 1962, it’s 57 and a TRIS can start in 2018-19
  • 1 July 1962 and 30 June 1963, it’s 58 and a TRIS can start in 2020-21
  • 1 July 1963 and 30 June 1964, it’s 59 and a TRIS can start in 2022-23.

The preservation age will be 60 for those born after 30 June 1964 and a TRIS can start from the 2024-25 year and onwards.

This is a significant change and it is important for SMSF trustees to be aware of the age at which super can be accessed so they don’t accidentally pay benefits to a member who is not eligible.

Trustees may face penalties if the payment rules are breached.

This information has been provided for information purposes only.  You should not rely solely on this information when making any investment or tax driven decision.  Please refer to the ATO website for full details of the article and obtain advice tailored to your individual financial needs and objectives, from a professional adviser authorised to provide personal investment and taxation advice.  The ATO copyright disclaimer states: You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Neither the ATO nor the Commonwealth has endorsed us, or any of the services or products we offer.

From the ATO – Discretionary trust distributions

 

The ATO recently completed a review of SMSF annual returns where distributions from a discretionary trust had been reported. A similar review is planned for next financial year.

A discretionary trust is one in which the trustee has a discretion to determine the amount of trust income to distribute to each beneficiary.

In the review, trustees were asked to check the trust deed of the distributing trust – and any resolutions – to determine whether the amount reported at label 11M (gross trust distributions) was non-arm’s length income.

Distributions from discretionary trusts are considered to be non-arm’s length income, which is taxed at the highest marginal rate. These amounts should be reported at Section B: Income, label U2 on the SMSF annual return.

Trustees are reminded to ensure distributions from discretionary trusts are correctly reported in the SMSF annual return.

Refer to Non-arm’s length income and SMSF annual return instructions for guidance.

This information has been provided for information purposes only.  You should not rely solely on this information when making any investment or tax driven decision.  Please refer to the ATO website for full details of the article and obtain advice tailored to your individual financial needs and objectives, from a professional adviser authorised to provide personal investment and taxation advice.  The ATO copyright disclaimer states: You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Neither the ATO nor the Commonwealth has endorsed us, or any of the services or products we offer.

From the ATO – Make sure your self-managed superannuation fund (SMSF) has an active electronic service address

 

Make sure your self-managed superannuation fund (SMSF) has an active electronic service address

All SMSFs now need to be able to receive SuperStream-compliant contributions.

To do this, your SMSF needs to:

  • nominate a bank account to receive the contributions;
  • have an active electronic service address to receive data associated with contributions; and
  • ensure it has an ABN.

As an SMSF trustee, you can get an active electronic service address from an SMSF messaging provider, or through your SMSF administrator, tax agent, accountant or bank. You may need to check it is active with your electronic service address provider before you give it to your employer.

An e-mail address is not an active electronic service address.

Make sure you only use an electronic service address where you have permission to do so from the provider.

If your SMSF’s electronic service address is not active, your super contributions may not reach your SMSF and might be redirected to your employer’s default fund.

If your SMSF does not have an active electronic service address, you can obtain one from an SMSF messaging provider. You may also obtain one through your SMSF administrator, tax agent, accountant or bank.

This information has been provided for information purposes only.  You should not rely solely on this information when making any investment or tax driven decision.  Please refer to the ATO website for full details of the article and obtain advice tailored to your individual financial needs and objectives, from a professional adviser authorised to provide personal investment and taxation advice.  The ATO copyright disclaimer states: You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Neither the ATO nor the Commonwealth has endorsed us, or any of the services or products we offer.

Q3 Reporting Season Guide

 
 
Our premier partners, Australian Stock Report, have released their latest reporting season guide.

Whilst a number of companies have already reported we’re giving you, our valued members, the opportunity to access this document.

Gain the insight of Australian Stock Report’s analysts, on which companies they believe will meet, beat or miss expectations this reporting season.

The discussion paper not only provides recommendations, but also commentary on the companies our analysts are following.

If you would like to receive a copy of the guide, please click on the link below and register your details.
You will be given a free trial to Australian Stock Report’s research reports and you will be able to access the reporting season guide once you log in, via ‘The Hub’ which is in the menu on the left hand side of the page.

Get my Reporting Season Guide >>