APRA’s Quarterly Superannuation Performance publication for the December quarter of 2009 makes for some interesting reading.  There is more money invested by Australian’s in SMSF’s than in any of the other sectors of the superannuation industry.  Industry funds, despite the million of dollars of their members funds that they spend on advertising, had $218.9billion invested, compared to $386.1billion for SMSF’s.  For every dollar that goes into Australia’s superannuation system, just under 40 cents goes into a SMSF.  As at 31 December 2009, there were 420,023 SMSF’s in existence.

So why have Australian’s embraced Self Managed Super to such an extent?  In dealing with clients every regarding SMSF’s, the drivers we are seeing are:

1. The desire to be invested in property – we are regularly being approached by people who want to establish a new SMSF so that they can combine their super savings with some borrowings, and buy an investment property.  (If this is you, check out our April special).
2. Control – most of our clients are self employed or run a business, so they are accustomed to taking control and making decisions.  Contributing into an Industry or Retail super fund holds very little appeal.
3. Cost – as your superannuation savings get larger, SMSF’s become more attractive.  This is because off the shelf super funds all charge fees as a percentage of the balance.  So the larger your balance, the more you pay.  With a SMSF however, costs like your annual tax return and audit don’t vary greatly whether you have $100,000 or $1million within your fund.
4. The ability to combine superannuation savings between spouses – many couples like the idea of being able to have a joint superannuation account.  SMSF can achieve this.
5. Purchase business premises to trade from – for business owners they have the ability to buy a business premises with their SMSF and then lease it to their business.  Very attractive for a lot of people and now that SMSF’s can borrow, very achievable for many.

These are the five reasons I see most commonly which lead people to set-up a SMSF.  There is an additional benefit however that most people don’t recognise when they come into our office – tax savings.  If your SMSF purchases an asset (eg. shares or property), and then holds it until after they have retired, there is no Capital Gains Tax (CGT).  Even if they can’t wait until retirement to sell, CGT is only 10% within a super fund so long as you have held the asset for more than a year.  Large funds with many thousands of members can’t make buying and selling decisions around the date you will retire.  But your personal SMSF certainly can.

Of course few things in life are all positives and no negatives.  The drawback we hear from people with SMSF’s is the paperwork.  Own a portfolio of a dozen shares, and you are looking at 48 pieces of correspondence as a minimum each year.  Then there are the bank statements, tax office correspondence etc.  Unless you are an administration maestro, I would strongly recommend you utilise an administration service for your SMSF – and one that doesn’t charge based on how much money you have.

Wondering whether a SMSF is for you?  Give us a call on 03 9870 6544, or via email here.

The word cloud above was created by http://www.wordle.net/

Just when it seemed the GFC was behind us, the US Securities & Exchange Commission has decided to charge the largest of the US investment banks with creating a mortgage product that was designed to crash.  One investor apparently made $1billion from the product, but those on the other side of the bet allegedly lost a lot more.

So what does that mean for us in Australia?  Directly, not much.  Goldman Sachs have deep pockets and they will survive whatever happens, albeit with a somewhat tarnished reputation.  Indirectly however the ripples could be significant. 

Global share markets have been noticeably less volatile recently.  This will change in the short term at least.  More important though, will be the impact on the drive to regulate (re-regulate?) the financial sector.  President Obama has some proposals on the table which would cause some big changes to many global banks.  Australian bank chief’s have already been pointing out that they avoided the trouble of their foreign counterparts, and so shouldn’t suffer the regulatory burden being thrust upon the perpetrators.  The problem however is that we live in a global world, and nowhere is this more evident than in the financial world.  It is not possible for the US to make sweeping changes to banking rules, without the other major financial centre’s following suit.  Obama has already been lobbying the UK and Europe in this vain.

With Goldman Sach’s fighting a fraud case, it is hard to see how the US financial community can successfully convince the public that they don’t need more regulation.  And if those regulation get passed in the US, they will trickle through here too. 

What will it mean for Australian small business owners?  Money will be more expensive.  Banking is built on multipliers.  If you deposit $100 into a bank, they will lend out $90 of it.  But you still have $100 in your account, so now there is $190 in the system.  That person/business spends that $90, and eventually it will find it’s way back into the baking system.  Once deposited the bank will be able to lend about $81 of it, so now your original $100 has become $271 (your $100, a loan on the banks balance sheet of $90, plus $81 in someone’s pocket).  And this goes on an on.  The wash up of all this is that if you change the rules and demand that a bank hold 11% of all deposits as reserves rather than 10% say, this has a huge impact on how much money there is for banks to lend.

Let me know your thoughts.

I attended the Melbourne Internet Show today.  I listened to several interesting speakers and the one I found of most interest was a lady talking about the value of “multi channel” marketing.

This refers to the idea that one form of communication media, eg. an email campaign, was less effective than a campaign that crossed several mediums.  As an example, she quoted a case she had worked on where the outcomes were as follows:

It was this example that lead to my heading. 

Following up a mail out with  a phone call is well known to increase the success of the campaign – I wouldn’t bother with a mail out unless I knew we could make a follow-up call. How else could we use this “tag-team” approach?

Perhaps an email “teaser” with a mail out to follow.  You could even follow it with a phone call if the value of the ultimate sale made that worthwhile.

What do you think?

By Jamie Cheng jamie.k.cheng@gmail.com

Everyone at one point or another has had issues with their computer, no matter which operating system they are using. This can be due to a countless number of reasons, the most common though are breaches in security. Through some basic planning most businesses can avoid crippling security breaches.

Small businesses specifically often suffer immensely when security is breached, because there is no system of protection. Many small business employees simply are not given the training to know that their actions may completely destroy the system. A business that does not have a system to back up their information and develop a method of protection against attacks is very much at risk of losing everything.

For those interested, information services will help in education of what to do in instances of security breaches and how to avoid them in the first place. Both www.cert.org/ and www.auscert.org/ provide information on the latest software and secure systems, organisational security options, coordinated responses to issues and training for employees. For those that need further general information and persuasion of the importance of IT security, CERT also offers a podcast series at http://www.cert.org/podcast/.

By Jamie Cheng jamie.k.cheng@gmail.com

I recently had a job interview with a fast growing financial advisory company that has tripled in size every year since founding in 2007.

A great resource I found in preparing for my next interview and to better understand the mentality of the sales oriented company, was recommended by one of the founders – the educational seminars taught by Brian Tracy. Upon listening to some of his audio series, I found that The Psychology of Selling by Brian Tracy is a great starting point for those motivated to learn and begin selling more effectively.

While some of the products offered by Brian Tracy are more motivational and not exactly scientific, the sales information is very much practical and caters to many different sales types. A few great features I really appreciated include the methods that the top salespeople use, great case study success stories, methods to screen prospects, overcoming objections prospects may have and clear methods to close sales.

Worth a look for those whose business relies on sales (are there any that don’t?).

We know that many followers of investment markets enjoy the musings of Warren Buffet, the man considered by many to be the greatest investor there is.

As such, for those interested, the following link will take you to his most recent letter:

http://www.berkshirehathaway.com/letters/2009ltr.pdf

by Adam Claydon-Platt

There are a number of steps that any entrepreneur needs to consider when starting a business in Australia. The first step needs to be deciding what business structure you’re going to adopt before you get started. This is because the selection of the business structure is going to dictate which path you take when it comes to a number of subsequent decisions you will have to make. Therefore, examine the business structures carefully before you do anything else.

Types of Business Structures in Australia

Before you get going with your new venture, you need to select a legal structure for your business from one of these main choices: sole trader (also known as proprietor), partnership, trust or company. There are distinct differences between the four, so you need to have a general understanding of them before you can make a choice.

* Sole trader- this is a structure that is commonly chosen when one individual makes all the decisions for the company. This doesn’t mean that the business is strictly limited to only one worker. Typically, a sole trader is an individual owner of the business regardless of how many employees work for the business. This is a good structure for running a non-complicated business. This is especially true if there is not a lot of outside capital invested in the business where the sole trader would have complicated legal entanglements with investors. There are several advantages including less paperwork, operation under your personal name, less restrictive reporting requirements, tax losses may be deductible from personal income while the sole trader is entitled to all profits and ownership of all assets. The disadvantages include the sole trader is personally liable for all business debts, personal assets may be targeted for business liabilities, outside investment is usually quite limited to sole traders, time investment and business activity is conducted without the usual employee benefits and there are issues to consider for business continuity if the sole trader becomes ill or dies.

* Partnerships – are arrangements where there are several joint owners of a business who share the same goals and responsibility for making decisions. Most partnerships will create an agreement to cover particular issues such as the amount invested by each, profit division, business roles and responsibilities, rights and privileges concerning financial activity plus exit strategies for each owner as well as the business dissolution.

* Trust – are often a chosen structure running a small business although it is not a separate legal entity such as a company. Simply put, it is a business structure where a trustee, usually a business, carries out the commercial activity on behalf of the members of the trust which is set up through the creation of a deed. There are several types of trusts such as discretionary, unit or a combination of the two called a hybrid.

* Company – is actually similar to a sole trader or partnership, but it exists as a separate entity from the business owners. This type of structure protects owner assets from any type of business liability. It is subject to rules and regulations outlined in the Commonwealth law called the Corporations Act.

About the Author

Starting business in Australia enables you to take control of your life. Just follow the easy steps on our website, and you’ll learn everything you need to know about how to set up, maintain, and grow your business to the point where you can quit your job and spend your life doing what you love. http://www.startingbusinessinaustralia.com.au/

By Jamie Cheng

Recently I heard an interesting interview with Brad Smart that gave some tips to improve hiring results.

There was one tip that I thought was particularly ingenious. The tip was simply to outline in the selection process that candidates will need to arrange personal reference calls with formers bosses. The reason this works is explained in the summary eBook, Avoid Costly Mis-Hires! provided by Smart on his site.

‘High performers easily get former bosses to talk, because those bosses will be saying positive things, and they (correctly) figure there is no risk of a law suit.

Better yet, tell all candidates that in order to get a job offer they must arrange personal reference calls (at the appropriate time) with former bosses, and they will be more truthful in answering interview questions. And even better yet, when this requirement is widely known, low performers will not apply. Perfect!’

If you have time I recommend checking out this summary eBook of Topgrading that is available for free if you sign up for the monthly newsletter at www.smarttopgrading.com

An informative and entertaining article about negotiation from our friends at Affordable Advice.