We focus on you

We take a look at a couple in their early 60s

Barry and Sophie are both aged in their early 60’s; with Barry retired and Sophie still working in an executive role. Whilst enjoying a great lifestyle, they decided to seek advice on their current position and retirement intentions.

Both Super accounts were in retail funds (high growth) in Accumulation phase. They also held a substantial share portfolio and surplus cash in a bank account. Sophie intends to retire within the next 12 months.

They engaged Paradigm Group for insight and transparency into their overall wealth position. A key concern was whether they held sufficient assets to fund their long term retirement needs. Paradigm Group undertook a comprehensive analysis for Barry and Sophie. The following was highlighted:

• Their risk profiles were not consistent with their existing Super funds asset mix. They were identified as ‘moderately conservative’ investors, (remember their Super funds were in high growth funds).
• Barry’s super fund was in Accumulation phase, which was not tax effective.

Therefore, Paradigm Group assisted with the following strategies:

• Established an SMSF which provided greater flexibility, transparency and control.
• The retail funds were then rolled into an SMSF.
• Assisted with non-concessional contributions to the maximum limited of $300,000 each; made up of cash and shares, whilst being mindful of Capital Gains Tax implications.
• An account based pension was established for Barry.

To assist with their longer-term retirement needs, we also provided some cash flow projections showing the impact of their investment capital of withdrawing a pension in line with their requirements.

By seeking our advice, we provided Barry and Sophie with a clear strategic plan now, and for the future. We were able to highlight some flaws with their current structures and importantly rectified these to ensure all assets were achieving the best possible outcomes.

Barry and Sophie are also now educated and have a clear path in relation to their retirement plan and how they may achieve their desired retirement income.

Getting your SMSF back on track

Bill and Betty were co-Directors of their SMSF trustee. Their Accountant had established an SMSF for them, together with a Limited Recourse Borrowing Arrangement (LRBA) to facilitate SMSF borrowing to acquire a property through their fund.

Bill unfortunately later became ill and was unable to work. This led to issues relating to loan repayments. In addition, constant stress at home eventually led to their marriage falling apart. They approached Paradigm Group to assist with the appropriate splitting of their superannuation entitlements and to arrange for fund documentation to be amended to reflect that.

Upon delivering our recommendations, Paradigm Group were engaged to undertake these works and conduct a full analysis of all fund operations.

As a result of this analysis, we identified that the LRBA was incorrectly established which impacted on the SMSFs stamp duty exemption upon beneficial ownership transfer from the LRBA to the SMSF upon the loan being extinguished.

These issues were communicated to Bill and Betty and as a result Paradigm Group were then asked to remedy this situation via facilitating the redrafting of pertinent legal documents and liaising with ASIC and the ATO in this regard.

In total, Paradigm Group were able to assist with:

• The splitting of superannuation entitlements accordingly between the two members
• Re-establising accurate legal documentation so that the loan arrangement could continue without legal impediment
• Orchestrate appropriate insurance coverage for the remaining member to ensure loan repayments would be met should defaulting on future loan repayments become a problem
• Notify the authorities (ASIC and ATO) of the changes made and liaise with them on behalf of the Trustee
• Educate the Trustee around relevant SMSF regulation and their Trustee obligations

The Fund continues to operate today in a legal and compliant manner.

Moving into Aged Care and selling the former family home – Anne

Anne (Aged 87) feels she is finding it difficult to manage on her own. After a government assessment (ACAS) and a family meeting with Paradigm Group, Anne has decided to move into an aged care home which has a published RAD price of $500,000. Anne has sold her family home and as a result freed up proceeds of $700,000 to fund the RAD. Anne has $200,000 left over after sale of the former family home.

Anne would like to know if she will have enough money to cover aged care fee’s after moving into care?

Anne will be required to pay a basic daily fee of $57.14 or $20,856 per annum (every resident pay’s this amount which is equal to 85% of the aged pension). In addition to the daily fee, Anne will pay a Means Tested Fee. The fee payable depends on the level of Anne’s income and assets. In Anne’s case, her means tested fee will be $23.55 per day or $8,596 per annum (the Means tested fee is subject to a lifetime limit of $66,078). If Anne invests her remaining savings in an interest-bearing account earning say 2.4%, she should receive approximately $4,800 per annum in interest. A summary of income and expenses are shown below :

Income:

Expenses:

In this case, Anne has enough income to support ongoing care costs. By seeking advice, Anne and her family are prepared for the future and are comfortable with funding Anne’s aged care costs.

* Rates above are applicable as at May 2019. Where there are no existing assets other than the former home, the home can be sold to fund entry into an Aged Care Home, this entry fee is known as a Refundable Accommodation Deposit (RAD).