Avoid these common mistakes to keep your business on track

Plan icon(1)

From managing to marketing and everything in between, the world of small business can be both exciting and overwhelming. When you first start up, you have dreams of making the big time. But as time goes on, you may discover that although you have the passion, the energy runs out quickly when each day provides the next challenge.

Don’t let these common mistakes keep you down. Avoid them, and get your business back on track.

Failing to plan – The saying is true: If you fail to plan, you plan to fail. This is a big problem for many small businesses. If you don’t have goals and specific plans on how to get the business where it needs to be, you will be distracted by every detour along the road and your business may end up nowhere near the ultimate destination. Spend a day at the beginning of each year setting out your goals and plans — it doesn’t have to be pages long. In fact, try to put your goals on one page and pin it above your desk so you can refer to it regularly.

Not understanding cash flow – Remember, cash is king. Every business fails when they run out of cash. Most business owners focus on sales and profits, but cash flow is critical to the success of your business. Many profitable business still struggle with cash flow. You need to understand the difference between profit and cash, and focus on ensuring you have adequate reserves to cover the unexpected.

Believing “build it and they will come” – Don’t listen to those who say, “build it and they will come.” Of course we believe in our product or service offer to customers. Just because we feel that we have the answer to the customers’ problems does not necessarily mean they are aware of their problem — or know you have the solution. It takes more than simply opening a business to guarantee sales will happen. You need to stay on your marketing toes at all times to keep a steady stream of customers visiting your business.

Putting garbage in — and expecting to understand it later – If you put garbage in, you will get garbage out. Many small businesses use spreadsheets to keep their financial, customer and key business records. Although this might suffice at the beginning, once the business is up and running, you need specialist software that will ensure all the information you record is correct and accurate. Spreadsheets are prone to errors. There are no built-in controls over the information entered, and spreadsheets will not provide critical information in a decision-making format without an enormous amount of time and effort. Use tools that are designed for record keeping and deliver reports and key performance measures on demand — it will make your life easier and improve your business.

Have you established a solid team? – If you are going to be successful, you’re going to need a team of people to make it happen.  You are an expert in your field, and that is why you decided to start your own business, right?   Well what about other areas of the business, where specialised skills are also needed?  By putting together a team of professionals, that have the skills to benefit your business, you will give your business a higher chance of survival.

Are you thinking of starting your own business?  Cementing the right foundation from the start can help you avoid these common mistakes. We have over 27 years experience working with small business.  Success stories come from when businesses have a very clear plan from the start.  We can help you with your business plan.

Register now for our FREE small business workshops.  Held the first Tuesday of every month in The McMahon Osborne Group Boardroom, at 5.30pm.

First workshop is Tuesday 7th March 2017, at 5,30pm.

To register click on the link below

click-here

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Leave a comment

Filed under Uncategorized

Don’t leave behind a financial mess for your family

binding-death-benefits

Husband Barney, 64 and wife Lisa, 45 decided to setup a SMSF using a corporate company as trustee.  The SMSF invested in a residential property, Australian Shares and a Managed Fund.

Barney & Lisa have 2 young children from their marriage.  Barney also has 2 adult children from a previous relationship, Jessie who is the oldest girl at 30 and Jason who is 25. Jessie is married with children of her own and Jason is young single and travelling the world.

Barney has a super benefit of $560,000 and Lisa a super benefit of $140,000.  Both have a will and named Jessie as their executor (Legal Personal Representative).
Neither Barney nor Lisa had Binding Death Benefit Nominations in their SMSF. Lisa had expressed her wishes to Barney for her super monies to go to their 2 young children, however Barney wanted the super money to go to all four of his children equally. They have also written this in their will.

Unfortunately Lisa was diagnosed with aggressive terminal cancer and died within weeks of the diagnosis. As Barney was the trustee he abided by Lisa’s wishes and paid her benefit to their 2 young children.
Lisa was removed on death as a director of the trustee company and Barney continued on as the only director and his super benefit remained in the fund.
Barney died a couple of years later from a heart attack.  As Barney has died his legal personal representative needs to step in as the single director trustee, being Jessie.

In the circumstances as there is no binding death benefit nomination and the will cannot control superannuation monies, it is up to the trustees discretion on who the benefit is paid to.
Jessie feels that she is more entitled to the money than anyone else and has decided to pay the entire benefit to herself.
Jason was very upset as he believed he was getting a quarter of the fund, the young children had no idea what was happening.

Jason engaged a solicitor and challenged the trustee’s payment of the benefits in court as his father had expressed verbally to Jason and also in his will that it was to be divided up equally.
The courts ruled that Jessie was able to pay the entire benefit to herself as there was no binding death benefit nomination, the will cannot control superannuation and the verbal expression was only a wish and not binding. The law states it is the remaining trustee’s discretion as to where the money is paid when there is no binding nomination.

Alternative Result:
If Lisa had completed a valid Binding Death Benefit Nomination (BDBN), she would not have to rely on Barney doing the right thing and paying her benefit as per her “wishes”. Barney would be legally obligated to payout as per her BDBN.
If Barney completed a valid BDBN, Jessie would not have been able to get away with paying the benefit to herself. She would be legally obligated to payout the benefit as per the BDBN in 4 equal shares, and all of the children would be provided for as per Barneys “wishes”.

click-here

** LIMITED SEATS REMAINING – LAST DAY TO BOOK ** 

If you would like to learn how not to leave behind a financial mess for your family, then register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February, 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

Thank-you to all those people who have already booked!

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product

Leave a comment

Filed under Uncategorized

Risk profiling, the key to a successful outcome.

Happy retired couple sitting on the bench

The year was 2006 and Gary & Janet had been married for 27 years and were contemplating retirement as they were both nearing 60, their children were now living independently and their investments were really well placed including their industry based super funds which had been providing massive returns year by year.

They had always looked after their own finances and thought they had a pretty good handle on this but, prior to retirement they thought it prudent to see a financial planner and were recommended to us.  We had a look over their situation and, on the face of it, everything seemed pretty good – wills in place, powers of attorney in place, some solid investment properties and a healthy super balance with a well reputed industry fund.  But something just didn’t feel right……… it was almost too right.

A closer inspection of the super fund showed that Gary & Janet were allocated to the default strategy within the fund which had served them very well to date as it was called a “Balanced Growth Fund” and had 75% aggressive assets and 25% defensive assets.  Heading into retirement with protecting the wealth built up Gary & Janet had no concept just how aggressive this could be.

Following an extensive discussion regarding “risk vs return” we determined that Gary and Janet were far better placed for a less aggressive structure and moved their investments to 50% aggressive and 25% defensive along with some additional planning to increase liquidity and income focus in their investments.

In the following three years after this change the Global Financial Crisis was at its peak and a number of Gary and Janet’s close friends in similar positions lost a large portion of their retirement savings which remained in aggressive superannuation portfolios.

On the other hand, Gary and Janet’s superannuation savings held up during the GFC – they still had a small loss but nothing like the losses suffered by their friends.  The combination of a portfolio suited to their risk profile together with an income rather than growth focus meant that the losses from the market were reduced and most of the losses were offset by an increased level of income.

Risk profiling was the key to this outcome.  In a world of immediacy and instant solutions, the importance of risk profiling can be quickly lost.  Returns should never be based upon a single month, single quarter or even a single year.  Returns must be viewed in the context of risk taken and risk profiling.  The S&P 500 (the largest share market in the world) has negative returns on 46% of trading days, yet the worst return over any 20 year investment term was 54% positive return.  Over any 30 year period the worst return was 854% positive return.

So the questions each investor must ask are:

  • How much of a short term loss can I sustain before I am nervous?
  • How long a period can I stay with my convictions before I start second guessing my decisions?
  • What is my primary objective from my investment mix?
  • What is the time frame for my investment period (remember the day you stop investing is either the day your money runs out or the day you die – whatever comes first)?
  • Do I even understand my own risk profile?
  • What education do I need to understand risk profile more soundly so I avoid any rash decisions?

If you are unsure about your investment portfolio, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here
General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product

Leave a comment

Filed under Uncategorized

Heartache that could have been avoided

divorced-couple

Case Study

Michael & Tanya were separated with two beautiful children (aged 19 and 14 years old).  Despite being separated they still had a very healthy friendship and were both committed to helping each other out and worked well in bringing up their children.  The eldest child was in the 3rd year of his plumbing apprenticeship and lived with two mates in the next town whilst the 14 year old lived with Tanya.

Tanya worked part time and lived in their primary residence whilst Michael was living in the couple’s investment property only a few blocks away.  Michael was very fit and jogged regularly, however after a morning run he suffered a major heart attack and to the complete shock of everyone passed away.  Unfortunately, there was no Estate Planning in place – Michael and Tanya had discussed the issue many times but had never got around to actually putting any steps in place.

Michael’s superannuation fund carried with it a life insurance policy so, including his superannuation account the total payment was around $800,000.  This was contested by Michael’s family (who still held Tanya responsible for the separation) and after 10 months the trustee of the fund determined that they would pay the benefit direct to the two children equally.  As the eldest child was a non-dependent his pay out was burdened with a significant tax bill of around $90,000.

Further to all of this, as the two houses were owned by Michael and Tanya as joint tenants the ownership of both properties reverted to Tanya on death automatically.

All in all, no one was happy with the overall outcome and this only added to the personal stress and heartache that everyone was suffering as a result of Michael’s sudden passing.  So much of this could have been avoided with some advice and planning.

What Could Have Been Done?
Binding Death Benefit Nominations (BDBN) – if a BDBN had been in place Michael could have specified who would receive the funds from his superannuation payment.  A super trustee is obliged to follow the instructions of the BDBN so the trustee would not be required to make a determination but rather just follow the instructions.

Life Insurance – the life insurance policy could have been established outside of super and the payment be directed to the benefit of the eldest son.  In turn this would have given Michael the ability to direct a greater proportion of his superannuation benefit to his 14 year old.  This would have meant that the $800,000 would have been taxed at a much lower rate as payments from a life insurance policy held outside of super and payments to a financial dependent from a superannuation fund are both tax free payments.

Property Ownership – the properties could both have been held as “Tenants-in-Common” rather than “Joint Tenants”.  Michael’s share of each property would then have formed part of his estate and a valid Will could have been prepared to define who would be entitled to the benefit attached to each property.

Moral of the Story
Whilst everyone agrees that good Estate Planning is important far too many people don’t get around to sorting out their estate planning.  Yes, it takes time, effort and some quality advice and the preferred combination is to have your lawyer, financial planner and accountant all aware of your intentions.

Michael & Tanya’s situation is real and could have been avoided – if you are one of the many Australian’s who haven’t addressed their Estate Planning needs, don’t become a Case Study.  Commit to completing this task and then take it one step at a time.  Like anything worth doing, there will be times when the task seems too daunting but, when you get through those challenges, you can sleep safe in the knowledge that you have showed true care and commitment to the most important people in your life.

If you would like to learn more about how you can make sure your family is protected, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here
General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product

Leave a comment

Filed under Uncategorized

The importance of planning ahead

brother-and-sister

Case Study
Peter and Kelly have been blessed with two children, Dominic and Kathy.  Kathy has special needs and will always be financially dependent.  Dominic has recently finished university and is about to commence full time employment as a nurse.

Peter and Kelly understand that if they are to pass away suddenly, they will need to plan for Kathy’s future financial situation.  In the event that they both pass away they have set up a testamentary trust.  A testamentary trust would provide Kathy with a tax free income stream for life, while Dominic would receive a lump sum from his parent’s estate.

The trust also means that Dominic will help Kathy where he can but doesn’t have the burden of worrying about how to invest funds and provide the income that Kathy needs for the rest of her life.

If you would like to learn more about how you can make sure your family is protected, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February, 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here

Leave a comment

Filed under Uncategorized

Solid relationship ensures a positive result

retirement-plan

Case Study

The current situation.
Our clients Shane & Peggy are married and both retired.  They have been clients for around 5 years.  Next year Shane turns 65 and Peggy is currently 60 – both Shane and Peggy are permanently retired.  Shane has a number of health issues and he is keen to explore options that may entitle him to an Age Pension when he turns 65 for the benefit of the Health Care Card so even $1 of pension would be of great benefit.  However, Shane is feeling that he is about to be “punished” for being such a good saver during his working career and putting money away into his superannuation fund as his assets now exceed his ability to obtain any form of pension and therefore any Health Care Benefits.

Shane & Peggy have been utilising the services of the McMahon Osborne Wealth Management team to invest their superannuation and each year undertake an annual review of their financial position.  In the most recent discussion Shane and Peggy discussed their concern and were resigned to the fact that they had no options regarding the pension.  However, as part of the ongoing service we asked if they would like us to explore any options available and they agreed but remained sceptical of what may pan out.

What we did.
Given there is an age difference of around 4 years between Shane & Peggy we created a plan that combined a re-contribution strategy and re-balancing strategy for the assets of Shane & Peggy.  This meant withdrawing part of Shane’s superannuation out of their SMSF to the joint bank account of Shane & Peggy and then contributing that money back into their SMSF from the joint bank account of Shane & Peggy, but as a contribution on behalf of Peggy.

The funds in Peggy’s superannuation account were left as an “Accumulation Account” which is excluded from the assets test for the age pension for residents under the age of 65.  This meant that the total assets assessed by Centrelink were reduced by around $300,000 when the eligibility for Age Pension is tested.

The result.
Whilst Shane was really only after $1 of pension so he could avail himself to the benefits of a Health Care Card, this strategy implementation meant that over the next five years the following benefits are now a reality:

· Shane will receive a Health Care Card from the age of 65 to reduce the costs associated with his long standing health issues

· On current estimates, Shane will receive pension payments of $91,466 over the next 5 years

By considering the whole picture of the personal circumstances of Shane & Peggy as part of an annual review, this opportunity became available with the difference in ages between spouses being the key that unlocked such huge potential.  This is an example of why Wealth Management and Financial Planning should never be a one off transaction – it was the ongoing relationship and review that brought up the problem and concern and then gave the opportunity.

If you would like to learn more about your options for a successful retirement register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Leave a comment

Filed under Uncategorized

Estate Planning – Planning for your future needs

retirement image

Estate Planning involves much more than just having an up to date will. It is important to ensure that your assets are distributed in the most effective manner and without adverse tax consequences for your beneficiaries.

Last week our focus was on the top 3 reasons for having an estate plan. We also discussed joint tenancy, tenancy in common, and assets owned by a company held in trust.  If you missed this article you can still read it by clicking on the link here.

This week we discuss planning for your future needs, testamentary trusts and tax effective estate planning.

Planning for your future needs.

You should also be planning for your own future requirements. For example, there may come a time when you’re unable to make decisions for yourself because of a loss of capacity. To assist here, you need to nominate an enduring power of attorney. This trusted person is someone you appoint to make financial and property decisions on your behalf.  Nominating an enduring power of attorney before you get to the ‘loss of capacity’ stage is important as you can’t nominate one after this happens. Remember that a regular power of attorney becomes invalid upon your death or if you lose the mental capacity to make your own decisions. An enduring power of attorney, however, will allow your trusted person to act on your behalf if this happens and you are no longer able to manage your financial affairs.
You may also wish to nominate a medical power of attorney, also known as an enduring guardian, who can make medical decisions on your behalf.

Testamentary trusts.
A testamentary trust is a trust established by someone’s will. It comes into existence only when that person dies. Including a testamentary trust in your will can be useful for making tax effective distributions to beneficiaries under the age of 18, caring for children or a dependent who is incapacitated, and preventing beneficiaries from inappropriately spending their inheritance.

Tax effective estate planning.
The disposal of assets in accordance with your will may have tax consequences, including CGT, that you should consider when drafting your will and creating your estate plan. There are many strategies you can use to help make your estate plan as tax effective as possible for your dependents and beneficiaries. Some of these strategies include:

  • ensuring the proceeds of an insurance policy paid from a superannuation fund is paid to dependents as this would be tax free;
  • distributing an asset (rather than the proceeds of the sale of that asset) to a beneficiary to defer any CGT liability;
  • using discretionary trusts can help minimise the tax a beneficiary pays on receipt of an inheritance; and
  • using testamentary trusts can be an effective way to provide an inheritance to young children.

Insurance cover: According to statistics, Australia has a large underinsurance problem. It found that if couples in their mid-thirties with young children relied on the default cover in their super fund, then only 30 per cent of their life insurance needs were covered.

Tax: There are many tax time bombs found in estate planning. For instance, an asset you leave one child may be subject to capital gains tax while an asset left to another may be exempt. This could result in each child receiving very different inheritances when you thought you were leaving them equal shares. Also, the tax payable on some benefits may depend on each beneficiary’s personal circumstances.

Asset ownership structures: Different structures offer different benefits. For example, a testamentary trust comes into effect at the time of your death and can help protect your assets against any claims that arise if your children become divorced or bankrupt. They can also be used to reduce tax and provide for young or disabled children. Other structures include companies, self-managed super funds and family trusts.

Your wishes: You may want to give additional direction to those you have given powers of attorney. For example, an anticipatory direction lets you list what medical treatment you want or don’t want, if you can no longer make those decisions yourself. Similarly, an advance healthcare directive (or living will) details the type and extent of healthcare you wish to receive. You may also want to spell out your desires regarding your funeral arrangements, rather than have your family second guess what you would have wanted.

Estate planning can be complicated, but it’s important to do things properly so that your family can avoid any potential legal issues – especially as regulations change over time.  At a time when your loved ones are coping with a loss, don’t leave them with additional hurdles to overcome.

SEMINARS COMING IN 2017
Is your retirement plan measuring up?
The essential toolkit for small business & tradies.

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Leave a comment

Filed under Uncategorized