Dear Friends
Let’s relax and deal with reality
Around a year ago I counselled superannuation investors not to get het-up about the proposed changes for balances over $3m being spruiked by the Federal Treasurer Dr Jim Chalmers.
Now that he has been instructed by the PM – after previously being advised to back off by the two architects of our highly successful super system, Paul Keating and Bill Kelty – I would also recommend holding back the celebrations.
Let’s see what proposed legislation actually becomes law (the Greens will no doubt have a say in the Senate, although the Coalition may also step up).
Every time Canberra makes a change to superannuation rules, there are always alternative strategies available to our clients. As my old friend and mentor John Thomson used to say: “I can’t change the direction of the wind, but I can adjust my sails.”
Please don’t think it is immediately time for a new strategy. On present indications, we will have around 18 months after any changes become law to ‘adjust our sails’, and we can discuss any remedial action required at our next meeting.
So, what can be done? Avoid having our superannuation balances over $3m taxed at 30% or balances over $10m taxed at 40%?
The starting point is that for a couple, the first $4million of super can easily be made tax-free– generating a very comfortable $200,000 pa in income for those aged 65-74 in retirement.
For larger balances, there are other strategies which can be considered.
As long as your residential home remains tax-free (and it would be a suicidal federal government who proposed to change that status) there remains the ‘Super’ house option. By directing further investment to your home, either by undertaking significant renovations, or upgrading to a more expensive location, your capital can still be effectively ‘warehoused’ in a tax-free environment. As well as gaining a very effective inter-generational wealth transfer tool, you may also get to live in a nicer home in enhanced surroundings! Please read my 2018 article on this topic here.
And don’t forget the insurance bond, a non-superannuation investment which delivers a completely tax-free return after 10 years (also known as an investment bond or growth bond). If access to funds is required sooner, you simply pay the tax that you would have paid at your marginal rate, less a 30% credit for tax already paid within the Insurance Bond.
The insurance bond also has other advantages, such as not attracting the 17% Death Benefits Tax, nor is it subject to estate rules – therefore it can be passed to whoever you designate. This may be beneficial in situations of family breakdown or where multiple relationships are involved. You can read more about insurance bonds here.
And another thing – what to do when markets are close to all-time highs
As I write, superannuation investors are receiving huge returns, for which we can take no credit, other than to place you in the investment strategy which is appropriate for you. As I see it, my job is to protect you on the downside. What is currently happening is the workings of the investment markets. Gold recently hit an all-time high and share markets also hit all-time highs Many people are asking “What should we do?” “Should we sell?” “Should we borrow money to invest?”
My advice is simple – stick to your strategy.
I have written in the past about ‘Spooky October,’ the month the market often breaks. This is coincidence rather than the rule. I know a break is coming, I just don’t know when. In 2008 (the year of the GFC) markets all over the world plummeted 55% – and then rebounded (as they always do). Therefore, stay in your seats and remember – if you are in the drawdown phase of super, you have the Marinis Buffer to deploy as your shock absorber. It worked perfectly (as designed) during the GFC, and it will again when required.
And one more thing – transferring wealth to future generations
Superannuation is not the ideal inter-generational wealth transfer tool. In fact, I don’t think that tool has been invented yet, as 90% of families lose their wealth over three generations. But there are strategies which can help significantly. If you are interested, please read this article here and feel free to raise it with Dylan Holiday, Jason Zanini or me at our next meeting.
And (yet) another thing – we will be moving premises in 2026
After seven years in our present location in Norwood, our lease is coming to an end (in April 2026), and our ‘roommate’ Piteo Accounting and Advisory have decided to move into a dedicated single space.
As a result, visitors will now see a For Lease sign at the front of our office.
We will let you know as soon as we have secured new premises, and I can assure you we will remain committed to maintaining our service levels during our relocation.
If you have any concerns, as always, feel free to reach out directly to me.
Cyber safety
Follow: http://www.cyber.gov.au/protect-yourself. This is an important Federal Government anti-scam initiative in the current environment.
Never trust social media. Do not ever invest via Facebook – you will just be handing your money to a thief.
One of the layers of security of which I am very proud, is that our clients all have a personal relationship with their adviser and our team. We recognise voices, we know everyone, we are business ‘friends.’ We will ask questions only you could answer if we are the slightest bit unsure. So, do contact us about any super or investment related matter.
As always, if I or any of our team can be of assistance, please don’t hesitate to get in touch by either calling (08) 8130 5130 or email admin@marinisgroup.com.au
Happy Christmas
If you celebrate Christmas, we wish you and your loved ones every joy in being together. Of course, Christmas can be a very sad time too. If that is the case for you, it is our hope that you will have caring people around to help you deflect your sadness. Our grief reminds us of how deeply we care.
Yours sincerely
Theo Marinis CFP®, B.A., B.Ec., CPA., MCIFAA
Financial Strategist
Authorised Representative
