Self Managed Super: Are you ready to DIY? is an Authorised Representative of RI Advice Group Pty Ltd

Disclaimer RI Advice Group Pty Ltd, ABN , holds Australian Financial Services Licence Number and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts. The information provided in this seminar, including any tax information, is general information only and does not constitute personal advice. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. From time to time we may send you informative updates and details of the range of services we can provide. If you no longer want to receive this information please contact our office to opt out., ABN, is a Corporate Authorised Representative of RI Advice Group Pty Ltd ABN , AFSL is an Authorised Representative of RI Advice Group Pty Ltd ABN , AFSL Important Notice

Introduces the basics of self-managed super Looks at advantages and disadvantages Helps you decide whether it suits you Where to go for more information Today’s presentation Why are you here?

What is a Self Managed Super Fund (SMSF)? A super fund where up to four people can pool their super and take full control and responsibility for managing it as trustees. The sole purpose of the SMSF is to provide benefits to its members on their retirement. Regulated by the ATO. 3

SMSFs are popular Rapidly increasing number of Australians are taking full control… Fastest growing superannuation sector Over 500,000 SMSFs with more than 1 million members SMSFs have nearly a third (i.e. over $520 billion of the approximately $1.7 trillion) of all super savings Ten years ago, SMSFs represented only one-tenth (10%) of all superannuation money Predicted to grow to approximately $2.25 trillion by 2033* 4 Sources: Self-managed super funds: A statistical overview , Australian Taxation Office. Dynamics of the Australian Superannuation System: The next 20 years, Deloitte

SMSFs tend to suit People who… Operate small family businesses Like to have hands-on control over investment decisions Have their super customised to play a key role in family wealth and estate planning Wish to invest in alterative assets 5

Why so popular? Two main advantages cited by SMSF trustees Control – choose when and where to invest, including shares, residential and commercial property, cash, term deposits etc. Flexibility – you can make decisions as a result of changing market movements and options for retirement income streams and estate planning. 6

Why so popular? Other SMSF advantages Family first: inter-generational wealth accumulation and transfer - no legal time limit on how long SMSFs can last. Fee savings: fee structure can deliver substantial savings compared to other retail super funds. Creditor protection: a member’s fund assets are normally protected from creditors in the event of bankruptcy. Tax concessions: such as ability to withdraw super lump sums tax free to members over 60 in most circumstances is a huge benefit during retirement. 7

Why isn’t everyone doing it? Valid reasons why SMSFs aren’t for everyone… Time burden: running a SMSF can be time-consuming for trustees Risk of penalties: non-compliance with legislation and rules can mean significant tax penalties and, in serious cases, prosecution of trustees Balancing act: ongoing costs to operate a SMSF, can be uneconomic for members with balances less than $200,000 More responsibility: the ultimate legal responsibility rests with the individual trustees, not other professionals e.g. advisers, accountants No ‘captain’s calls’: if a trustee takes action outside of that agreed by all parties, they can be sued by the others For love, not money: trustees can’t be paid for running a SMSF, nor can they be an employee of another trustee (unless they’re family) 8

About trustees SMSFs can have… A maximum of four members Where every member is a trustee And no trustee can be an employee of another (unless they’re related) Trustees can’t be paid for their services Trustees can be companies as well as individuals 9

About trustees Trustees are responsible for designing, implementing and regularly reviewing an investment strategy that: Protects members’ retirement benefits Minimises the risk of irresponsible or incompetent investments Meets your stated SMSF investment objective 10

What does it cost to run an SMSF? Three types of cost Set up costs (one-off) – could be up to $2,000 Operating expenses (ongoing) –mostly mandatory and fixed –approx. 1% of assets e.g. $5,000 for $500,000 fund Personal time costs (ongoing) –how active do you want to be? –average 3.7 hours per week managing SMSFs^ 11 Note: Industry regards $200,000+ fund balance is the minimum to be cost-effective Source: Super reforms research: SMSF trustees quantitative findings, 2011, Colmar Brunton research, prepared for: Australian Taxation Office.

Common SMSF investments Three most popular SMSF assets 12 32% Direct Australian shares 28% Cash and term deposits 16% Direct property Source: Self-managed super funds: A statistical overview , Australian Taxation Office.

Investing in property SMSFs can invest in real property: Commercial property: e.g. a factory, warehouse, business leased premises, doctors surgery Residential property or real estate: e.g. investment units and houses The rules Meets the 'sole purpose test' - only provides retirement benefits to members Can’t be acquired from a related party of a member Can’t be lived in by a fund member or any fund members' related parties Can’t be rented by a fund member or any fund members' related parties SMSFs can’t invest in the family home or holiday home for personal use Can invest in investment properties – as long as property used for investment purposes only 13

Borrowing to invest Prior to 2007 there were very few opportunities for funds to borrow directly. Indirect borrowing via trusts or companies was possible but there were a number of risks and limitations. A geared investment in a superannuation fund can be achieved via a structure known as a ‘limited recourse borrowing arrangement’. A limited recourse borrowing arrangement can enable a fund to utilise borrowing to purchase a range of investments, including direct property. 14

Borrowing to invest - Case Study Sandra wishes to purchase a property which is currently valued at $500,000 Her SMSF has significant investments but she wishes to use $200,000 in the SMSF to purchase the property. The property can be purchased by using a limited recourse loan. 15

LRBA Structure - Case Study 16 Super Fund Lender Trust Commercial Property Security Bank Institution $300,000 $200,000 $500,000 Assets $300,000 This will allow $200,000 for purchase and $100,000 for ongoing fund expenses and loan repayments.

Borrowing to invest – who can benefit? Gearing investments via super including property and shares Those who have met the concessional and non-concessional contribution caps Younger members who wish to bring forward the purchase of investments via super 17

SMSFs and insurance Trustees must consider members’ insurance in the investment strategy You can purchase insurance within your SMSF Allowed within SMSF –Life insurance –TPD insurance – ‘Any Occupation’ definition –Standard Income Protection insurance policies Not allowed within SMSF –TPD insurance – ‘Own Occupation’ definition –Trauma cover –Comprehensive income protection 18 Note: Complicated area where exceptions exist - explore your personal situation with a financial adviser

A typical SMSF What does an SMSF look like? 19 Income Dividends Contributions Rollovers Fund Bank Account Trust Deed/ Trustees Administration & tax Auditor Members The Fund’s Investments

Advantages Tailored to suit you Investment flexibility More control Tax effective Intergenerational asset transfer Potential cost savings Disadvantages Only for retirement income Formulate and implement an investment strategy Must have a trust deed and trustees Must comply with SIS rules Severe penalties for non-compliance rest solely with the trustees SMSF pros and cons Summary 20

How we can help We provide complete SMSF support on… Appropriate SMSF structure set up Specific investment strategies for all members Life insurance needs analysis for all members Maximise SMSF contribution cap strategies Oversee the ongoing management of your fund (with direct access to ANZ Self Managed Super account) Effectively transition to retirement Maximise Centrelink and other Government benefits Estate Planning and inter-generational support (where relevant) 21

Your ‘all-in-one’ SMSF solution Our SMSF Service Package 22 Investment Strategy Investment Selection Administration Compliance Investment Advice Direct Share Advice Managed Funds Ongoing Investment and Strategic Advice – trustee and member level Trust deed & other document services 24/7 Administration Management Solution Audit Tax return preparation

Questions 23

What next? Make an appointment today Complete the feedback form if you’d like someone from our office to follow you up Go to our website. Grab a guide/flyer before you leave 24

Thank you.