Financial Planning
If you plan on retiring at 65 years old, chances are you’ll need your retirement savings to last you around 15 to 20 years – at least. Saving for retirement can be daunting whether you’re still in the middle of your working career, nearing the end or already retired. The good news is, however old you are, there are always ways to create a more comfortable retirement for yourself. When should you start planning for retirement? The earlier you start planning for retirement, the better. Even if you think retirement is a long way off, it’s important to think about how much money you will need, what kind of retirement lifestyle you want to lead and how you can give yourself a head start. 40s and early 50s When you are in your 40s and early 50s, it’s easy to push your retirement to the back of your mind. Things like paying off your mortgage, sending your kids to school and looking after elderly parents can seem like more pressing commitments. However, taking time to plan for your retirement will make it easier for you in the long term. Good steps to take in your 40s and early 50s include: Do the maths and figure out how much you will need to live comfortably in your retirement. Don’t forget to factor in bucket list goals and travel. Sort out your superannuation. Remember if you are a business owner, you are responsible for your own super. You may prefer a self-managed super fund (SMSF). Get on top of your debt. Seek advice about ways to reduce your debt. For example, making extra contributions toward your mortgage. Consider making additional contributions to superannuation to help boost your retirement savings and reduce your tax e.g. salary sacrifice or personal concessional contributions to super. Sort out your personal insurance cover to ensure you have a safety net if you are unable to work due to a disability Illness or death. 50s and early 60s If you’re in your late 50s or early 60s, it’s not too late to start making a positive move towards a more secure retirement. This is a great time to work out a retirement plan and figure out how you want to transition out of work. Steps to take as you move towards retirement include: Make non-concessional contributions to boost your super. Consider a self-managed super fund (SMSF) to have greater control over your super. Look into a Transition to Retirement (TTR) pension if you want to reduce work hours without losing your income. Review your personal insurance cover to ensure they reflect your financial position. Over 65 years If you are already in retirement or considering your options, there are still some things you can do to make your retirement more comfortable. Considering that your retirement may last 20 years or more, financial decisions you make now can still impact your future. Things to consider if you are over 65 years old include: Get advice about what to do with your super – whether to take it out as a lump sum, start a super income stream or leave it in there. Review your investment strategy to better suit your retirement needs. Plan your living situation. If you sell your home, you may be able to contribute up to $300,000 to your super. Make sure you have the proper estate planning and that you have the right people stepping in for you to make financial and personal decisions on your behalf if you are unable. Planning for your retirement can be daunting, whatever age you are. Make sure you seek professional guidance and financial advice when making decisions about your future. The team at Design Financial Advisory helps busy business owners, working professionals and couples approaching retirement work towards a comfortable retirement that aligns with their goals.
Directly held property makes up approximately 19% of all SMSF assets, indicating that many SMSF trustees consider it’s an important and significant part of a diversified portfolio. There are numerous strategies and ways for property to form part of an SMSF’s investments and each must be carefully considered. Investment strategy first! Before any investment decision, it is imperative and a legal requirement that you as an SMSF trustee must consider your investment strategy. Your strategy should detail such things as how much exposure you would like to the property market, the form of exposure and how appropriate it is for your current circumstances. A well-diversified portfolio is essential to provide income for retirement and spread investment risk so that any single asset class, such as property, does not dominate your SMSF risk and returns. Direct investment A common form of property exposure is direct investment into a property. This can be in the form of either a residential property or commercial property. When purchasing a property with an SMSF’s cash there are some important considerations that must be worked through including: Your asset allocation and diversification. Potential rental income and property expenses. How close you are to retirement and the need for liquid assets to pay pensions. Unless the property is a business real property (BRP) you or your related parties cannot use the property: If the property is BRP you may be able to work from the premises which is owned by your SMSF. You may also be able to utilise the small business CGT concessions and contribution limits. Limited Recourse Borrowing Arrangements (LRBA) SMSFs may also invest in property through an LRBA. These are complex borrowing structures which allows SMSF trustees to take out a loan from a third party lender. The SMSF trustee then uses these funds to purchase a property to be held on trust. The lender only has recourse to the property held in the trust – this is why the loan is “limited recourse”. An LRBA should only be utilised when it is the right structure for your SMSF on the basis of SMSF Specialist advice. Some very important considerations in addition to the ones above include: Can your SMSF maintain the loan repayments over a long period of time considering asset returns, interest rates, liquidity, and contributions caps? Evaluating set-up costs and structures. Is your property valuation accurate? You cannot use borrowed money to improve the asset or change the nature of the property at any time. Do you meet the strict bank lending requirements? Typically, lenders require the SMSF to have a minimum of net assets of $200,000 or more and for the loan to have a loan to value ratio below 70%. Indirect investment Another way to gain exposure to property for SMSFs is through indirect investment. This can include listed invested vehicles such as listed investment companies and exchange traded. Managed investment trusts are also a common investment for SMSFs to gain exposure to property. Investing indirectly may suit your SMSF needs more than a purchase of a property because it is relatively simple and most likely will not require a large amount of capital. It also allows your SMSFs to get exposure to large value properties such as office blocks, shopping centres and industrial properties that would otherwise be out of reach. Investing in these products should be accompanied by SMSF Specialist advice. How can we help? SMSF Specialist advisors can help you understand how the different forms of property investment may or may not be relevant for your SMSF portfolio and the impacts it may have on you and your fund. Please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirements, especially in regards to what property investment would be most appropriate for your SMSF. For further information, visit the SMSF Association’s Trustee Knowledge Centre ( http://trustees.smsfassociation.com/ ) to keep up to date with different asset classes you can invest in within your SMSF, including property, and reach your financial goals. As always, the above information is general in nature and may not be suitable for your circumstances. If you require advice, give the team at Design Financial Advisory a call today on (08) 6263 9933 to discuss your needs.
The sandwich generation is a term used to describe people who are caring for their children as well as their aging parents. It can be a stressful and tiring position to be in, and can put strains on both your financial and emotional wellbeing. It’s important to get your own finances in order first so that you can be in a better position to help aging parents or children who are ready to leave the nest. Here are 6 financial strategies to help take the pressure off. Make a plan When looking after multiple generations, it can feel like you’re being pulled in several directions at once. It’s important to take the time to make a plan and consider your own financial goals before making any big decisions. When you’ve made a plan, you can feel more confident moving forward. Talking with a financial advisor can help you consider all your options and may even open doors you may not have considered. Understand your parents’ finances As your parents get older, they may need assistance with managing their finances even if they don’t need direct financial support. You should discuss things like their assets, debts and income sources, their living arrangement goals as they get older and estate options in case they can no longer manage their own affairs. Discuss with your family If you have siblings, it’s important to talk with them about how you will divide the responsibilities of caring for your parents. Keep in mind that not all responsibilities are financial. If there is an imbalance in how much support each sibling provides, you may want to discuss the option of repayment using your parents estate if appropriate. Involve your children If you have adult children still living at home, consider ways they could help the household financially. Discuss the option of them paying some rent or covering some of the weekly household expenses. This can be a good opportunity for them to learn financial and budgeting skills before moving out for the first time. Protect your income If you have two – or three – generations depending on you, it’s important to protect your income in case something should happen to you. Your life and total and permanent disability insurance policy should be able to take care of your mortgage and any major life expenses to ensure you and/or your loved ones are looked after. Trauma (or critical illness) insurance can provide a useful injection of money to pay for medical expenses and provide continuity for supporting loved ones while you recover. If you’re not sure what coverage you need, speak with Lawrence Group about your priorities and ways to get the best coverage for your budget. Consider government assistance Research into government subsidies that you, your children or your parents may be eligible for. Centrelink is a good place to start for childcare subsidies, rent assistance and carer entitlements. Also check out My Aged Care website to apply for an aged care assessment. Seek professional help It can feel overwhelming to be responsible for both your children and your parents and it’s important to reach out for help if you need it. Getting professional financial advice can help you feel more confident and at ease going into the future. As always, the above information is general in nature and may not be suitable for your circumstances. Chat with the Lawrence Group team about how we can help.
Healthy cash flow is a two way street. There are several things you can do to increase the amount of money flowing into your business, but you should also consider ways you can decrease outgoing cash. Here are 7 ways small businesses can reduce costs to improve their cash flow. Cut unnecessary expenses Start by taking an audit of all your expenses from production and purchasing equipment to marketing, sales and administration. Identify areas where you can save. For example, are you paying for software or a subscription that you don’t use? Take a close look at your biggest expenses – are they providing a good return on investment or do the costs outweigh the value they offer? Now might be the time to look for alternatives or scale back in these areas. Make your processes more efficient Lost time is lost money. By making your business processes more efficient you can win back time – time that you can spend on growing the profitability of your business. This could involve using automatic accounting software to handle parts of your invoicing and accounting processes. Or it may involve restructuring your business and workflows to better reflect your goals. Talk to your suppliers Consider if you are overpaying suppliers and try to negotiate better prices where possible. If it makes sense for your business, you may be able to secure a discount for buying inventory in bulk. You could also ask for an extension on your payment terms to avoid short term bottlenecks in your cash flow. If you cannot negotiate better prices from your current suppliers, take time to research alternative options. Keep a close eye on marketing Marketing is crucial for increasing cash flowing into your business. Unfortunately many small businesses end up spending a lot on marketing while getting a poor return on their investment. Closely monitor your marketing efforts, cut out the tactics that aren’t working and focus on what is getting you good results. Think about leasing equipment If buying equipment outright presents an issue for your cash flow, consider leasing equipment instead. The equipment won’t be a fixed business asset, but paying smaller regular payments to lease it may help with budgeting and forecasting. Consider outsourcing Outsourcing non-critical business tasks could be cheaper than employing someone in-house to do the job. It can also free up your team to focus on other aspects of your business. For example, hiring a marketing agency might be more cost effective than keeping your own marketing department. Outsourcing something like production can save you from expensive equipment costs and training costs. Explore remote work As the past year has proven, remote work is a viable option for many businesses. While it might not be right for everyone, choosing to have a full or partial remote workforce could lead to significant savings. With employees working from home, you might be able to reduce your office size and associated overhead costs. Chat with the team at Lawrence Group for tailored advice about reducing costs and improving cash flow for your business.
Is your Self-Managed Super Fund (SMSF) adequately diversified? SMSF trustees need to truly understand diversification and better diversify their portfolios. The benefits of a well-diversified portfolio are numerous but the key ones that SMSF trustees should focus on are the benefits of mitigating volatility and short-term downside investment risks, preserving capital and the long-run benefits of higher overall returns. By spreading an SMSF’s investments across different asset classes and markets offering different risks and returns, SMSFs can better position themselves for a secure retirement. However, did you know that 82% of SMSF trustees believe that diversification is important but in practice many do not achieve it? This is because half the SMSF population cite barriers to achieving diversification. The top being that it is not a primary goal for SMSF trustees, and they believe they have a lack of funds to implement it. Furthermore, 36% of SMSF trustees say they have made a significant (10%) asset allocation change to their SMSF over the last 12 months. This demonstrates that SMSFs may not be actively restructuring their portfolio on an annual basis to respond to changing market conditions. Another clear problem regarding diversification is the amount of SMSFs with half or more of their SMSF invested in a single investment. SMSF trustees say they primarily invest in shares to achieve diversification in their SMSF, while just a quarter say they invest in at least four asset classes to achieve this. The bias and significant allocation to domestic SMSF equities conversely may highlight the fact that SMSFs are not adequately diversified, especially across international markets and other asset classes. So what can you do? Some of the steps you, with the help of an SMSF Specialist, can take to diversify your retirement savings and control your investments in a disciplined and planned way include: Ensuring there is a clear and demonstrable retirement purposes in the choices you make. Ensuring you have an investment objective and a strategy to achieve that objective in place. Reviewing your portfolio and assessing it against the objectives you have set as often as you feel is necessary. Minimising concentration to any one asset class. Ensuring your Australian share portfolio is sufficiently diversified. Considering the benefits of geographic diversification. Ensuring your cash allocation is appropriate. Considering the benefits of exchange traded funds, listed investment companies and other digital investment platforms that allow low cost access to different markets. Always remember to document your actions and decisions, as well as your reasons, and keep them as a record in order to demonstrate that you have satisfied your obligations as a trustee. Given the importance of having an appropriately diversified portfolio and its impacts on quality of life in retirement trustees ought to consider professional assistance in managing this important aspect of an SMSF. How can we help? If you need assistance with diversification with your fund, please feel free to give the team at Design Financial Advisory a call to arrange a time to meet so that we can discuss your particular circumstances in more detail, or refer to the SMSF Association Trustee Knowledge Centre. Need tailored advice? Chat with the team at Design Financial Advisory today on (08) 6263 9933
Catch up on Concessional Contributions Business owners may be able to claim a personal tax deduction for concessional super contributions over the yearly cap. Here’s what you need to know. What are concessional contributions? Concessional contributions are contributions you make to your super fund that are tax deductible. These contributions should be made before the end of the financial year. You can contribute up to $25,000 a year. If you don’t make the full $25,000 contribution in a year, you can carry forward the unused portion to the next year. Carry forward contributions are tax deductible and can be used from up to 5 years previous. Non-concessional contributions are contributions from your after tax income that are not tax deductible. These can be up to $100,000 a year. How do catch up concessional contributions work? From 1 July 2018, any concessional contributions you did not make under the cap ($25,000) can be carried forward to the next year. This makes it possible to make a concessional contribution this year which is greater than the cap. For example, if you contributed $15,000 last year, the leftover $10,000 can be carried over to this year. This increases the cap from $25,000 to $35,000 for this year. Concessional contributions that were not made can be carried forward for up to 5 years. You may be eligible to use carry forward contributions this year if: Your total super balance is under $500,000 You made less than $25,000 in concessional contributions in the 2018/19 or 2019/20 financial years You are making concessional contributions over $25,000 this year What are the benefits? Being able to increase your concessional contribution cap for a particular year may help reduce your personal assessable income and personal income tax. By making the most of carry-on concessional contributions, you may end up with a greater superannuation balance, setting you up for a more secure retirement. Who should take advantage of catch up concessional contributions? Although anyone can make carry on concessional contributions, the benefits are particularly positive for: Self employed individuals Business owners who don’t get paid a wage People who want to retire early or improve their retirement savings If you are a business owner who doesn’t get paid a wage, the super guarantee is not a legal requirement and you are responsible for making your own super contributions. The carry-on concessional contribution gives you greater opportunity to make super contributions and save for retirement. Many business owners overlook the importance of super, but it should be a key part of their retirement strategy. If you are a business owner whose income greatly varies from year to year, the carry-on concessional contribution allows you to make greater super contributions on the more profitable years. As always, the above information is general in nature and may not be suitable for your circumstances. Before making any decisions regarding concessional contributions, it is important you seek advice to ensure this strategy is right for your situation and how it could benefit you. If you require advice, give the team at Design Financial Advisory a call today on (08) 6263 9933 to discuss your needs.
Employees automatically have contributions made to their super fund by their employer, but if you’re self-employed that responsibility falls on your own shoulders. In Australia there are a number of super options available to self-employed individuals including self managed super funds (SMSF). Like standard industry or retail super funds, SMSFs are devoted to providing for your retirement. However, there are a number of key differences which you should understand before making the right choice for yourself. SMSFs are often a lot more involved than people realise. What is a self-managed superannuation fund in Australia? A self-managed super fund is a private super fund that you manage yourself. It is also a type of trust which means it needs its own Australian Business Number (ABN), Tax File Number (TFN) and bank account. A SMSF can have up to four members or trustees who are all involved in managing it. Is a self-managed super fund worth it? The main advantage of a self managed super fund is the level of control you have over your own super. You choose the investments and insurance that you want. The downside is that all this control means a lot of responsibility also falls on your shoulders. SMSFs require much more effort and knowledge than traditional funds so you should only set one up if you understand the risks and responsibilities involved. According to Money Smart , SMSFs tend to perform worse than professionally managed super funds. SMSF risks and responsibilities Managing a SMSF is a significant time commitment. Costs for setting up and running a SMSF can be high. You are personally liable for all decisions made, even if you get professional help. Non-compliance can result in penalties and fines from the Australian Tax Office. You are responsible for managing the fund, no matter what your circumstances (for example, even if your business cash flow is low). The investments you make might not result in good returns. You will need sound knowledge and skills about investing to properly manage a SMSF. If your SMSF loses money due to theft or fraud you will not be eligible for compensation, unlike traditional super funds would. Insurance may be impacted or harder to obtain for SMSFs compared to traditional super funds. Relationship issues with other trustees of the fund could have a negative impact on your SMSF. Can I have a SMSF and an industry fund? It is possible to make contributions to both a SMSF and an industry fund. However, it would be a unique circumstance that would make this a beneficial strategy. Having two funds would mean extra costs and more time commitment, so the pay off would need to be worth it. If you have an industry fund, you can roll your super over to an SMSF. The opposite is also possible: if your SMSF winds up, you can roll your super over to an industry fund. Whatever your circumstances, it is important that you make the right decision for you. Seeking expert advice can help give you the tools you need to make an informed decision. At Lawrence Group, we offer financial services , business planning and support for stronger local businesses. Speak with us today to see how we can help you. This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.
When you’re a business owner or company director, many things can go wrong. And when they do, your assets – both business and personal – are at risk. Whether you’re in the early stages of business, or have been in the game for a while, it is crucial that you take the steps towards adequate asset protection. What does it mean to protect your assets? Protecting your assets means putting in place legal strategies that will safeguard your wealth in the unfortunate event of a lawsuit or creditor claims. Below we outline some of the techniques individuals and businesses use to limit how much access creditors have to certain assets. How can I protect my assets in Australia? 1. Choose the right business structure There are multiple considerations to make before deciding on the right business structure, but in terms of asset protection, sole traders and partnerships are not the best options. In Australia, if you are a sole trader or an individual partner in a partnership, your personal assets are exposed to business liabilities. Companies and trusts offer somewhat more protection. 2. Separate personal from business Don’t mix your business activities with your personal. You should have a separate bank account for your business, and your business name should be used on all business documents. That way if your business runs into trouble, your personal assets may have more protection. 3. Use the correct procedures If you act negligently or don’t meet your legal obligations, creditors may have grounds to get at your personal assets. To avoid this, you should ensure your contracts, agreements and procedures are carried out professionally and meticulously. Effective and robust contracts can help limit your liability with relevant stakeholders. 4. Get business insurance Insurance is a crucial aspect of any business to protect you if something unfortunate happens. It’s important that you get the right type of insurance for your business, as different industries are more susceptible to some events than others. Consider whether your business would benefit from an ‘umbrella liability insurance’ on top of your other insurance types. 5. Transfer assets to spouse’s name If one spouse is more at risk of being sued in their occupation than the other spouse, it can be a strategic move to place assets in the less at-risk spouse’s name. Generally, the creditors of the at-risk spouse will not be able to touch the assets in the other spouse’s name. 6. Use trusts or other entities Discretionary trusts are another strategy business owners can use to protect their assets. When you are the beneficiary of a discretionary trust, you don’t own any of the trust’s assets which means your creditors will have a difficult time making a claim on them. While trusts and other entities can be an effective strategy for asset protection, the finer details can be complex and professional assistance is key. 7. Speak to an expert Even if you recognise the importance of asset protection as a business owner, it can be overwhelming to make and implement a plan. The question ‘what is the best way to protect my assets?’ may feel daunting, but speaking with an expert can make all the difference. We offer financial planning to help Australian businesses find the best way forward. Speak with us today to see how we can assist you. This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.
Consider for a moment, if you want to achieve a goal, but don’t think about the practical steps you need to take in order to get there, you probably won’t ever achieve it. The same is true for Financial planning. It is all about creating achievable goals that help you realise financial well-being. A financial plan will give you perspective and can help you feel empowered about your finances and provide the practical steps you need to reach your goals. What are the benefits of financial planning? Become debt-free Being in debt can be overwhelming, and it’s often hard to see how the situation can change. However, a financial plan with clear and achievable steps can make managing debt easier. Developing a sound financial plan could set you on the path towards a debt-free life. Manage income and increase cash flow A financial plan will enable you to manage your income more effectively and make sure it’s going to the right places. A financial plan will also help you manage your spending and expenses efficiently so that you can maximise cash flow . Without a plan, chances are your income isn’t being managed as effectively as it could be. Reduce your tax The world of tax obligations can be complex and intimidating, but developing a plan with a professional financial advisor can help you successfully navigate tax . A robust plan will help you meet your tax obligations, while taking advantage where you can. Handling tax successfully will help you advance towards your overall financial goals. Be OK when the unexpected happens Unexpected bumps in the road are a fact of life, and we all experience them at one time or another. A robust financial plan takes this into account, and helps you be prepared for the unexpected. Whatever happens, financial planning is an important step towards getting through it comfortably. Make your future secure Financial planning encourages big-picture thinking. While it will help you with your immediate financial needs, it will also help you create a secure future for yourself and your family. Understanding what you value, and what lifestyle you want in the future can help you develop a financial plan to achieve your retirement goals . Feel in-control & confident In the end, a financial plan is all about making you feel in control of your money, and confident about your financial security. Knowing where you want to go and how you’re going to get there can give you peace of mind, letting you focus on the things that are really important in life. Do you need professional financial planning? Some people choose to do their own financial planning, but it is important to obtain advice from a qualified financial planner as there are many complex factors that should be considered. An expert can help provide you with clarity and confidence that you will be able to achieve your financial goals. At Lawrence Group, we help individuals and businesses who: Want to manage their finances successfully but aren’t sure how to go about it. Don’t have enough time to handle their own financial planning. Aren’t confident with the ins and outs of financial matters such as investments, taxes, superannuation or retirement planning. Have created a financial plan, but would like a professional opinion about it. Experience an unexpected situation that they need assistance handling financially. If any of these situations apply to you, why not get in touch with us and see how we can assist? At Design Financial Advisory, we offer financial services , business planning advice and solutions that really work for individuals and businesses to achieve their goals. Understanding what you value and desire financially is at the core of our services, and we are committed to creating forward-thinking strategies that suit your unique needs. This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.
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