Category: Super

| A happy employee is a productive employee
By Matthew Brown

The Importance of Fostering a Positive Work Environment

“Your number one customers are your people. Look after employees first and then customers last.”

* Ian Hutchinson, author of People Glue

We spend an average of 7.5 hours per day, 5 days a week at work. Hence, it’s only natural that we’d want a healthy and happy environment to work in. In fact, a 2012 study by Robert Half International Inc. supports that sentiment.

So how much impact can a positive work environment have on employee productivity, and in effect, on the growth of a company? In this article, we’ll explore how corporate atmosphere can foster or stunt employee engagement at work.

A happy employee is a productive employee

When employees feel safe, happy and valued in their workplace, they are more likely to engage at work, and this fosters healthy competition among colleagues. This positivity spreads out to the business’s bottom line! Happy employees are more productive and less likely to be tardy, take frequent leaves, and make mistakes that can be costly to the business.

Remember that your employees should be your biggest brand advocates. And if they’re happy to work with you, they’ll be more inspired to create innovations and ideas that will propel your business to success.

It only takes one bad apple to spoil the whole bunch

Just as positivity can spill out to the whole organization, negativity, too, can cause an outbreak of pessimism among an entire corporation. It only takes the dissatisfaction of a small group of employees to create an environment of stress and distrust among the entire workforce.

Companies and organizations need to realize that employees are the lifeblood of the business. If they are not happy, they are less productive and more prone to slack off and produce mediocre results.

A negative work environment, too, can take its toll on your employees’ health and well-being. Stress-related illnesses account for the biggest bulk of employee absenteeism. Not only that, these illnesses could lead to other debilitating conditions, such as heart problems, diabetes, Alzheimer’s disease and depression.

The grass is always greener on the other side

According to the infographic published on a post by bitrebels.com, one in three workers has accepted or left a job due to the condition of their workplace. About 80% of employees, too, agree that the office environment has an impact on their perception of their employers.

These figures say a lot about the importance of championing workplace health to quell turnover rates.

A good work environment also fosters growth of future leaders

When Bill Gates once said that “As we look ahead into the next century, leaders will be those who empower others.”, he was talking about how important it is for organizations to inspire their people to become leaders themselves. Fortunately, you don’t have to be Bill Gates to do all that.

By promoting a positive environment that not only minds your employees’ physical, emotional and mental well-being but also their career growth, you will not only earn your employees’ loyalty, but also making future leaders who will usher your company’s success.

It is also important that you share your company’s vision to your employees so they can do even more than they have done in the past.

What does a “happy” work environment look like?

A work environment doesn’t necessarily have to look like Googleplex to be considered a happy and positive one (although that may be a good idea to consider in the future). But there are telltale signs that indicate that you’re already doing a good job in fostering a positive working environment:

A calming and comfortable physical environment

Where your employees work will have a big impact on their productivity and work temperament. If your office is dark, untidy, and brings out the claustrophobic in everyone, it may be high time to redesign your office layout. Consider opening the windows to let natural light in. It not only gives everyone their daily dose of vitamin D’s, it also puts everyone in a great working mood.

Also, consider investing on workstations that give everyone enough leg room and make it comfortable for them to sit for long hours.

Incentives

Incentive schemes let your employees know that their hard work and dedication is greatly appreciated. If you don’t have one in place, it’s high time you do. It not only promotes healthy competition among colleagues, but also gives them a better reason to strive harder (not that they don’t already).

Opportunities for growth

A good working environment is also one that provides opportunities for your employees to grow and stay relevant in a world where technology and business is constantly changing. Hence, it is important that you have programs in place that will help them stay up to date with the latest trends in your industry, and train them to become future leaders in your organization as well.

Clear and fair office policies

Is your work policies designed to instill discipline among your employees, or are they created to oppress them? Review the company rules and regulations you or your HR department have drafted. Make sure

that they not only protect the best interests of the company, but also promote their welfare and rights as well.

that they not only protect the best interests of the company, but also promote their welfare and rights as well.

A culture of positivity can also build positive connections

Your company’s corporate culture is just as vital as your office environment. When your workplace nurtures a harmonious relationship between all coworkers, regardless of seniority, it promotes healthy work dynamics that are beneficial for the growth of your company.

Open and honest communication

How your employees interact with each other says a lot about your company’s environment and culture. If your workplace is so silent, you could hear a pin dropping, it could be a sign that your workplace is an unhappy one. A positive work environment should be one which fosters open (but respectful) communication among employees across different levels, where everyone’s opinions and ideas are welcomed. You’ll know open and honest communication when you see one: there’s a sense of warm and welcoming familiarity between employees that go beyond the office realm.

Gossip, too, is a sign there is a communication breakdown somewhere between the higher management and the down line.

| What you need to know about Passive Income
By Matthew Brown

For the jaded 9-5 employee, the idea of earning a “passive income” has become a silver lining.  The prospect of generating revenue streams while you’re sleeping, or sipping mojitos in some tropical beach was the stuff dreams are made of, for someone who would like to give up working for income.  But what does passive income really entail?  This article will give you a lowdown on passive income.

What is passive income? 

Investopedia defines passive income as earnings derived from a rental property, limited partnership or other enterprise in which he or she is not actively involved in.  So basically, it’s anything you earn from ventures that you are not hands-on with for most part.  It could be in a form of shares from a business you have invested in, but are not working on directly, or royalties you earn from the books you have published, or patents you have created.

What are the benefits of earning passive income?

When done right, you can reap the following benefits:

Extra revenue stream when combined with your day job.  Wouldn’t it be nice to earn a bit of extra cash without having to toil for another 4-5 hour for a part-time job?  Earning passive income lets you do just that:  earn extra without having to get a second job to make ends meet.

Buffers.  Think of it this way:  if you get laid off from your work, or if you don’t have gigs booked for a month, you probably won’t have much to get by for the next four weeks.  Earning passive income every month lets you ride through rough times until you can get another job, or get a gig.

Protection against inflation.  The great thing about income from rental properties is that you have full control of the rental fees.  This means you can increase every year to keep up with the inflation rates.

Improve your credit ratings.  You’re more likely to improve your credit ratings when you rent out or lease properties, for as long as it’s officially registered and backed by bank statements.

You own your time.  Being your own boss is probably the most obvious perk of earning passive income.  For starters, you’re not answering to anyone but yourself.  You’re in control of your time!  Think about it:  Can having a 9-5 job let you to spend more time with your family, or go yachting to the Bahamas?  We can bet our bottom dollar you can’t.  But with passive income, you can do all these and more, and still see the dollars rolling in.

Sounds great!  Now where do I start? 

There are many ways you can generate a steady stream of passive income.  But these are the most common:

Become a landlord.  Sure, you can earn huge capital gains from buying and selling properties.  But wouldn’t it be better if your properties keep working for you, thus guaranteeing you positive cash flow regularly?  Leasing out your house or apartment can guarantee you a steady revenue stream, provided that you have the right skills, the patience to deal with the most difficult tenants, and the 24-7 responsibility of maintaining the property you are leasing or renting out.

Earn dividends from income portfolios.  Income portfolios are usually made up of different investments that will result to a predictable payout, according to moneycrashers.com. Investments can be in a form of bonds, dividend stocks that payout portions of a company’s profits, annuities, or microloans.  While the returns are lucrative, income portfolios also come with risks, and it is important that you are familiar with these types of investments before you dive in.       

Earning from interests from bank investments.  Earning interests from bank investments entail lower risks, compared to earning dividends from stocks or investment portfolios.  But depending on the type of savings account you applied for in a bank, interest rates may be lower.  Case in point:  some Australian banks may only offer more than 2% interest on savings accounts.  But you can always consider high-yield money market savings accounts, if you want to yield higher interest rates compared to regular savings accounts.

Corporate and government bonds.  When you’re investing on bonds (whether corporate or government), you are basically lending money to a government or a private institution at an agreed interest rate for a certain period of time.  So what you’ll earn are:  (1) the face value, which you’ll be getting back once the bonds mature, and; (2) the interests you earn each year.  But just like any other investments, bonds can range from very safe, to very risky (though less volatile compared to shares).  Hence, it is important that you know where you’re investing in.      

Earn online through affiliate marketing.  Affiliate marketing is basically the practice of rewarding one or more affiliates for each visitor or customer they have brought through their affiliate marketing efforts.  Simply put, it’s earning revenue for each visitor who clicks on the ads posted on your website or blogs.  To earn from affiliate marketing, you must first:  Build a website with rich, relevant and helpful content (it could a blog, or a business website where you sell your own products, and advertise other products as well), and sign up for an affiliate program (such as those offered by Amazon.com or Google.com) and choose which products or services you can feature on your website.  The sellers will provide you a unique affiliate code you can use to refer traffic to the target site.  If you love to write, or showcase your knack for graphic designs on your website, you can earn on the side by signing up for an affiliate program, optimizing your website, and keeping it updated with fresh and relevant content.

Now, the caveat

Do take note that “not actively involved in” does not necessarily mean not getting your hands dirty from time to time.  A website that’s not updated and optimized according to Google’s most recent algorithms won’t guarantee you revenue, just as a rental property that has fallen into disrepair won’t invite tenants.

As Patt Flynn of Smart Passive Income puts it, “There’s no such thing as a 100% passive income”.  Any form of revenue streams will always involve time, passion and effort to put up and maintain, including passive income.

| The science of snooze: Four more reasons to enjoy a restful sleep at night
By Matthew Brown

Getting a good night’s sleep does more than guarantee a cheery mood in the morning.  Read on and know why you shouldn’t skip bed time again.

These days, we’re finding more and more reason to delay bed time, whether it’s checking emails or social media accounts, or catching up on TV shows we’ve missed.  But did you know that you’re doing more harm than good when you’re skimping on quality sleep?

Here are four more reasons to enjoy a restful sleep at night:

  1. Our cognitive abilities depend on it. Think about how your computer’s performance slows down, the longer it stays powered on.  Our brain functions in much the same way when we go through a number of days with little or no sleep.  Studies show that our brains need to clear out all that junk accumulated during the day to keep it functioning at its best.  A. Thomas Perkins, a sleep expert and director of the Sleep Medicine Program at Raleigh Neurology in Raleigh North Carolina calls it the “glymphatic system”.  This system performs a routine flushing, by going through the spaces between cells and neurons and purging out the metabolic waste of the day, and this happens every night, while you’re sleeping. And when depriving yourself of sleep, you’re hindering your brain from doing this nightly flushing, thus essentially, your brain is trying to function with all that amassed junk laying around.  As a result, your ability to reason, remember, focus, and make good judgement calls are all impaired, and that’s bad news for your productivity.  The effects could even be more deadly when you’re driving or operating heavy machinery.
  2. Lack of sleep can affect work and personal relationships. So maybe getting a good night’s sleep won’t always guarantee a perky mood in the morning.  But it surely does keep you from waking up on the wrong side of the bed.  Jodi A. Mindell PhD., a professor of psychology in St. Joseph’s University in Philadelphia and author of Sleep Deprived No More says that not getting enough sleep can affect your emotional regulation.  “When you’re overtired, you’re more likely to snap at your boss, or burst into tears, or start laughing uncontrollably.”  It could also spill out to your personal life and put a strain on your personal relationships.
  3. Complete sleep = healthier you. Recent studies have found a link between sleep deprivation and serious health problems, such as heart diseases, diabetes, and obesity.  In most cases, according to an article in webmd.com, the health risks become more pronounced after a number of years. But a study has simulated the effects of disturbed sleep patterns of shift patterns on 10 young healthy adults.  After four days, three out of four already have blood glucose levels that qualify as pre-diabetic. Also, getting enough sleep can boost your immunity.  One preliminary study showed that people who got seven hours or less sleep were almost three times likely to get sick than those who got eight full hours of sleep.  But while that is still subject to more research and studies, it won’t hurt to get a full night’s sleep.  Your health and work success depends on it.
  4. Enough sleep keeps the pounds off for good.  Adequate sleep, too, can help you with your weight loss goals for two reasons:
    • Not having the time or energy to jog or pick up that dumbbell is the most obvious reason.
    • When you’re sleep deprived, you tend to have unhealthy food choices.  That’s because lack of sleep causes a drop in leptin levels, the hormones that play a key role in controlling your appetite.  As a result, you’ll feel hungrier and more likely to crave high-fat and high-calorie foods.

How much sleep is enough sleep?

While lack of sleep can be detrimental to your career and health, too much sleep, too, can have adverse effects as well.  Oversleeping has been linked to various health problems, such as depression, obesity, diabetes, and heart diseases.

So how much sleep is enough?  It will depend on certain factors, such as age.  But the consensus pegs 7-9 hours as the magic number.  Sleep beyond 9 hours is already considered excessive and could lead to detrimental effects on health and well-being.  Plus, your boss won’t probably buy oversleeping as a reason for coming to work late.

Quality of sleep matters, too

While the number of hours you sleep is important, the quality of your sleep matters just as much.  Even when you sleep for a full eight hours, you’ll still wake up feeling un-rested and drowsy when you haven’t gone through the most important sleep stages completely, and this can still have some effect on your productivity and health.

When we sleep, our brain doesn’t automatically shut off just like we used to think before.  We go through three stages of deep non-REM sleep (each stage deeper than the last), and an REM (Rapid Eye Movement) sleep, when dreaming occurs.  The third stage of the non-REM sleep is the most beneficial part of sleeping, as it is the time when our bodies repair themselves and build up energy for the next day.

Depending on the number of hours we sleep, we go through a number of sleep cycles that alternate between stages.  Each stage lasts up to 90 minutes, and we need at least 4-6 uninterrupted sleep cycles to get the benefits of restful sleep at night.

So how do you get a good sleep at night?  Here are some tips:

  • Follow a sleep schedule, where you go to sleep and wake up at the same time every day, even on weekends.
  • Fight mid-day drowsiness by taking a power nap in the early afternoon to pay off some of your sleep debt, and regain energy without affecting your sleep-wake cycle.
  • Get as much sunlight as you can.  Exposure to sunlight helps suppress the production of melatonin (the hormones responsible for regulating your sleep-wake cycle) during daytime, thus making you feel less sleepy while you work.
  • At night, keep your room dark to boost melatonin production.
  • Turn off the television or your computer, and as much as possible, avoid using your mobile devices when you’re in bed.  Not only will the light from these electronic devices slow down melatonin production, but it will also stimulate your mind rather than relaxing it.
  • Keep your room at a comfortably cool to aid in the drop in your temperature, which signals your body to wind down and prepare for sleep.
  • Keep dinners light for a restful sleep at night.  Avoid fatty foods, as these take longer to digest and thus keep you up longer.
  • Stay away from alcohol before bed.  While a nightcap may help you fall asleep at night, it may not necessarily help you get quality sleep, and you might find yourself waking up later at night.
  • Don’t drink coffee 6 hours before you go to bed.
| China’s Share Market Crash: How will this affect Australia?
By Matthew Brown

The start of the second quarter does not look promising for the Chinese share market as numbers continue to plummet down. The share market, or commonly known as the stock market, is the market in which shares of publicly held companies are issued and traded by brokers through exchanges and/or over-the-counter markets.

In the case of China, Shanghai Composite (SSEC) closed at 5166.35 points. This is the highest since January 18, 2008. By the end of July 3, 2015, however, the SSEC lost 1481.99 points, losing almost 29% of its recent high and more than $29 trillion in value.

This has made the country’s policy makers uneasy at the Chinese stock market for ignoring the signals from the country’s leaders. After the 7.40% dive last June 26, the People’s Bank of China (the central bank of China) responded by cutting its benchmark interest rates at the amount of reserves certain banks are required to hold. The said bank cut its one-year benchmark-lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%.

The reasons behind the fall of China’s stock market still remain unclear. There have been different theories that try to point out the cause of such difficult situation. The first probable theory is the incompetence of China’s past appointed stock market regulators. Shang Fullin was appointed as CSRC chairman for almost a decade, starting December 2002, until Guo Shuqing succeeded Fullin in October 2011. Xiao Gang took over as the chairman in March of 2013. [MFJ1] Although, there is no clear evidence to back up this claim, the Chinese stock market during their terms was seen as a roller coaster ride.

Those who see their asset values continue to decline in the last weeks blamed Xiao Gang, the current CSRC regulator, for the downfall. It has been reported that Xiao was not so good at Math. At an interview last March 17, 2012, Xiao confessed that he did well in Chinese literature but failed in his math during his national university entrance exams. Rumors have speculated that he could not comprehend the idea of the five-day moving average when some of his subordinates suggested that the CSRC pump funds to stabilize the SSEC at that level. But of course, stabilizing the share market is not just a simple mathematical problem.

Other people point fingers at foreign speculators. They strongly believe that big foreign banks and institutional investors had been shorting Chinese stocks. Global Times, a state-run newspaper that tries to look for negative consequences of external forces, came out to disprove the rumor by stating “foreign capital has only a small part of the Chinese stock market” and that “large-scale short selling by foreign investors in the Chinese stock market has not appeared and is an unlikely scenario.”

It turns out, the unpredictability of the stock markets has become a political issue but such needed intervention has not been effective. The Chinese leaders will likely find ways to boost the confidence in their stock markets. But such resolution could terminally backfire if they fail to handle the issue well. The government must be keen and decisive if they want to bounce back their market share.

Effects to Australia

To relay how this dilemma affects the entire world could take pages. To paint a clearer example, we look into one of the superpowers that may have a direct link to China – Australia.

Australia’s treasurer, Joe Hockey, says that the country’s economy has not been affected much by China’s stock market conundrum, even more so with Greece’s current financial state. This is despite the billions of dollars being wiped from the value of Australian shares in recent weeks.

The treasurer said the government’s economic plan was still “on track” because the effects of Greece’s economic downturn had been “minimal”, and China’s share market crash has not been severe to convince the government to change their forecasts for Chinese growth in the Commonwealth budget. In short, “The economy is not affected by what’s happening to Greece or China”, Mr. Hockey said.

To summarize, there are currently two major economic disasters that are running abuzz. These are Greece’s debt crisis that pushed the country out of the eurozone and China’s continuous downfall in its stock market. All of which have minimal effect to Australia’s constant economic boom. This comes as a good sign to Australia as it can rest well knowing it is unaffected by such turmoil.

| Reserve Bank of Australia August Update
By Matthew Brown

Cash rate unchanged; Remains at 2.0%

For the past three months, the Reserve Bank of Australia board has retained the cash rate at 2.0 per cent, according to the August 4 Monetary Policy meeting.

RBA Governor Glenn Steven’s reiterates that monetary policy needs to be accommodative to support borrowing and spending. Based on the available information, the Australian economy has continued to grow at a rate somewhat below longer-term averages. Growth of employment is somewhat stronger and unemployment remains to be steady over the past year.

Moreover, inflationary pressure has been contained as confirmed by recent information. Labour cost remains to show a very slow growth for some time and inflation forecast is expected to remain consistent over the next one to two years, even with a low exchange rate.

Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months. Real estate property prices continue to grow in Sydney, but pricing remains varied in other cities.

RBA is working with other regulators to assess and contain risks that may arise from the housing market. Lower long-term interest rates have been supporting prices for equities and commercial property. The Australian dollar continues to adjust from its significant decline in key commodity prices.

In the global scale

The global economy remains to be expanding on a moderate pace and has remained very accommodative, despite the drop in some key commodity prices. The Federal Reserve is also expecting to increase its policy rate later this year (although some other major central banks are still easing up on their policy rates). And while recent developments in China and Greece has shook the global economy, long-term borrowing rates for most sovereign and creditworthy partners still remain remarkably low.

As of the moment, the Board remains in a watch-and-wait mode, until information on financial and current economic conditions over the next period is released.

| Why You Should Let Chores Help Your Kids Earn Pocket Money
By Matthew Brown
Helping out with the laundry could be a great chore for your kids. Source: FreeDigitalPhotos
Helping out with the laundry could be a great chore for your kids. Source: FreeDigitalPhotos

Teaching children about the responsibility of having money is an important part of their education. It’s why so many parents choose to give pocket money to their children. By giving children pocket money in return for doing certain chores, you can teach your children that money has to be earned. This isn’t the only benefit of exchanging pocket money for chores. By doing chores everyday in order to earn pocket money, your children will grow a strong work ethic. They’ll become used to helping the family out on a daily basis, even if it began as a way to get pocket money. This willingness to get things done will transfer over to other aspects of their lives. For example, they may be more willing to work hard and get schoolwork done in exchange for good grades. The following are some chores kids can do:

  • Ages 2 to 3 – Because children at this age aren’t yet ready for larger tasks, concentrate on getting them to learn how to clean up after themselves. For example, provide a little bit of pocket money for picking up their toys and books and putting their clothes on hooks. Simple tasks such as setting placemats on the table can be done as well.
  • Ages 4 to 5 – At this point, your children can do a little bit more to help around the house in return for pocket money. Children at this age can help set the table, prepare meals under supervision, sort laundry, help put groceries away and more.
  • Ages 6 to 8 – At this age, your kids can actually do tasks that will help lessen the load for you. Some of the things that they can do in exchange for pocket money include taking care of your indoor plants or your outdoor garden (such as watering), changing the water and food for your pets, cleaning sinks and countertops, help fold laundry, mop floors, dust and take out the rubbish, just to name a few.

These are some chores kids can do for pocket money. Contact Your Corner today for additional financial advice.

| Stress Less by Conquering These 5 Myths About Super Funds
By Matthew Brown
Fears about your super shouldn't hold you back from retirement. Source: FreeDigitalPhotos
Fears about your super shouldn’t hold you back from retirement. Source: FreeDigitalPhotos

The point of your superannuation fund is to provide you with income for when you are retired. This can be terrifying for some people, since the last thing they want is to find out that they don’t have enough money to be able to live comfortably in retirement. The following are five common myths about super funds debunked to help you stress a little bit less:

  1. The need for better financial literacy – You shouldn’t be afraid of how your super is doing because you’re unfamiliar with all the terminology involved. Advisors should let you know what you are on track of obtaining in terms of income when you retire. This will make it easier for you to know how you need to budget for when that time comes.
  2. You need to stick to the four per cent withdrawal rule – Basically, many people believe that sticking to four per cent withdrawal will help reduce the risk of running out of money. But this is a relatively conservative number. In fact, Australian retirees must increase their withdrawals as they age, from four per cent when they are under the age of 65 to 14 per cent for when they are older than 95.
  3. You could suddenly run out of money in retirement – The minimum withdrawal rates are relatively conservative. This means that if you follow those, the risk of running out of money is incredibly small. In fact, you will be informed about any drastic changes of predictions of income based on your recent drawdowns, which means you’ll be able to modify your requirements. You’d basically have to be trying to run out of money in order to run out of money.
  4. Market downturns can destroy your savings – While this can occur, if you have a part age pension, you’ll also have a form of insurance many people aren’t aware of.
  5. There aren’t enough retirement products – There are actually plenty of investment products available to meet any retiree’s needs.

Don’t be scared by these myths about super funds. Contact Your Corner for additional retirement financial advice today.

| Are DIY Super Funds Really More Risky?
By Matthew Brown
Don't be fulled by what you've heard about SMSFs. Source: FreeDigitalPhotos
Don’t be fulled by what you’ve heard about SMSFs. Source: FreeDigitalPhotos

When it comes to choosing a type of super fund, many people are also wary of choosing an SMSF (also known as DIY super funds) due to the fact that there is no compensation scheme if the fund is exposed to loss due to fraud or theft like there is with more typical super funds. Because of this, there seems to be a general misconception about the risk of SMSF.

One of the reasons that SMSFs have been given the label of being risky is due to the fact that super funds were given $55 million in compensation payments for the 2009 Trio Capital fraud, compensation that SMSFs missed out on. However, this should not deter you from choosing an SMSF. In fact, you shouldn’t be fooled into thinking that compensation schemes are the answer to potential theft or fraud. Instead, you should look at compensation schemes that are already in place in the most common circumstances in which you might experience problems. Not to mention that the responsibility to be alert to any potential theft or fraud risks are on you as well.

There are actually a lot of compensation arrangements in place in the event that you suffer a loss because of fraud or theft. For example, SMSFs, along with all other financial institutions, subscribe to the ePayment code of the Australian Securities and Investment Commission. Basically, you’ll be compensated if you experience electronic payment fraud. In some cases, SMSFs are even less risky. For example, APRA-regulated funds provide members with direct listed investment options. If you were to invest in a listed company that experienced a loss because of fraud or theft, compensation for these losses would be difficult to pinpoint due to market fluctuations. SMSFs are self-directed investors, which means you make your own investment decisions, which can be both riskier and less risky depending on how conservative you are.

Don’t be deterred from SMSFs if you’re looking for a super fund that offers more flexibility. The risk of SMSF is dependent on how you manage it. For additional financial advice, contact us at Your Corner.

| Who can be the members of a SMSF…?
By Matthew Brown

RESTRICTIONS AND CURRENT LEGISLATION FOR MEMBERS OF A SELF MANAGED SUPERANNUATION FUND (SMSF)

Self-managed super funds (SMSFs) provide a way of taking control of your savings for your retirement. They are now the largest and fastest growing segment of the superannuation industry. When establishing a Self-Managed Superannuation Fund in Australia you are required to appoint either an individual or corporate trustee and also allocate members of the fund. A member is a person who contributes to the fund and who receives benefits from the fund. A fund can have anywhere between one to four members.

The SIS Act (Superannuation Industry Supervision Act) section 17a mentions that the basic conditions that must be met for Self-Managed Super Funds with more than one member are:

  • The fund must have fewer than 5 members
  • If the trustees of the fund are individuals then each trustee must be a member of the fund
  • If the trustee of the fund is a body corporate then each director of the body corporate is a member of the fund
  • No member of the fund is an employee of another member of the fund, unless the members concerned are relatives
  • No trustee of the fund receives any remuneration from the fund or from any person for any duties or services performed by the trustee in relation to the fund
  • If the trustee of the fund is a body corporate – no director of the body corporate receives any remuneration from the fund or from any person (including the body corporate) for any duties or services performed by the director in relation the fund. (AustLII., 2014).

In accordance with the SIS Act this means that family members, Business partners and friends (who are not directly employed by any member of the fund) can become members of the same Self-Managed Superannuation Fund. The government has set these restrictions so that no one member of the fund can have any higher level of importance over any other members of the fund. It also means however that if a husband owns a business and the wife is an employee then they can still be members of the same fund. This also means that all trustees of the fund are also members of the fund and all participants have proportional input into the decisions of the fund. All members are also personally liable for the decisions of the fund (Australian Securities & Investments Commission., 2014).

Other restrictions preventing an individual from becoming a member or trustee of a Self-Managed Superannuation fund would include any person who has been deemed to be disqualified from being a trustee of a fund. ‘Disqualified’ persons include individuals being in bankruptcy, individuals who have been disqualified by a regulator or individuals that have been convicted of an offence for dishonest conduct arising out of a law of the Commonwealth, State, Territory or foreign government, such as fraud (Hogan, P., 2013).

Ensuring that the correct members are chosen for a superannuation fund is highly important. A failure to acknowledge restrictions of Self-managed super funds could mean that the fund may end up being classed as non-complying, it may lose its tax concessions and it may even lead to larger financial penalties and civil or criminal prosecution.

Written By: Sarah Harding

| Don’t Make a Banking Mistake With Your DIY Super
By Matthew Brown
The following are a few basic actions you can take to avoid some potential problems down the line when it comes to a DIY superfund. Source: FreeDigitalPhotos
The following are a few basic actions you can take to avoid some potential problems down the line when it comes to a DIY superfund. Source: FreeDigitalPhotos

The do it yourself superfund is a great idea, but DIY super mistakes are a real possibility if you are not careful. You can avoid a lot of problems by doing a few things more effectively and dodging some unfortunate mistakes. The following are a few basic actions you can take to avoid some potential problems down the line.

Put the Account in the Correct Name

It is common knowledge that one of the worst DIY super mistakes is not having a bank account for the super itself. However, what a lot of people do not know is that the super needs to have its own bank account that is completely separate from the accounts of everyone involved in it. A lot of groups will use a trustee’s account, which is not allowed and can trigger a fine. Having an account just for the super is an excellent way to avoid this problem altogether.

Avoid Mingling Funds

Having your business pay into the super can appear in an audit to be overcontributing. At the same time, using funds from the super to purchase individual investments can be taken as an unauthorized withdrawal. If you perform either of these types of actions or similar ones, you can face stiff regulatory penalties that may even include both paying a fee and having to undergo a course on how the fund works. Keep your individual and business funds completely separate from your super, and you may even want to use different banks for each.

Monitor Investments Regularly

Your investments should have individual accounts for every type of investment, so that expenses come out of the most relevant account and interest, rent or dividend income goes into the account instead of qualifying as another kind of income. However, it is still important to monitor and reconcile these expenses on a regular basis. Monitoring your investments at least once per month is a very solid way to ensure that you are on top of any given investment’s performance. With each investment, you run the risk of making individual DIY super mistakes you can watch for.

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