thewest.com.au Monday, March 31, 2014 Forty, indebted and ......Mar 31, 2014 · the kids, biting...
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ᗄ Apparently, life begins at 40. But the party doesn’t last long. Soon after, you sink into a well of depression. So says a survey of two million people from 80 countries. Our 40s is the peak of our unhappiness. Age 44, on average, is us at our grumpiest. We hit middle age and get morose at our life being half over. (Or perhaps that our miserable existence is only half done.) Why? Mostly because our teenage kids are feral monsters, work’s a drudge and the hours are painful, the mortgage is still mountainous. Financially, professionally and at home everything is harder than we thought it would be at this age. You had dreamed of being somewhere by now. Just not here. Bugger! I’m 40-something. My work hours are stupid. My mortgage is an Everest, and growing, care of an addiction to property investment. But, personally, I’m not feeling like drinking myself into a coma like Nicholas Cage in Leaving Las Vegas. (I just did that for fun in my 30s.) Perhaps it’s because I started late and the DebtKids are just school-age and still believe their dad knows everything. Maybe. But I would also credit it to some words of wisdom I got on the eve of turning 40. It was from a lovely lady called Sue, who among the birthday wishes in an email, typed a line I’ll never forget. “Your forties is when you make it.” A bizarrely simple statement. But incredibly right. I’d written an 80,000-word book (Debt Man Walking) based on that sentiment. And Sue had just summed up my book in seven words. For most, the strain of life in your 40s is what sets you up financially for your 50s and beyond. The long hours, the sacrifices, taking on a bigger mortgage to upgrade or renovate, the struggle to pay down the mortgage, educating the kids, biting the bullet to buy investments . . . No question, your 40s is hard work. But depressing? Really? The study was global. And the statistics say it’s a worldwide phenomenon. Sure, it can be hard when you’re in the thick of it, but keep an eye on the medium term. The study said we get over it by 50. For those on the wrong side of 35, and approaching the “darkness” of being middle-aged, or now living it, here are five things to focus on. There’s not a Porsche, an affair or a gym membership in sight. It’s about understanding the truth of Sue’s words: “Your forties is when you make it”. The toil of this decade will deliver, eventually, in spades. Suck it up. The sacrifice will be worth it. One: Your home will become your castle. Your huge mortgage will reduce and your home will increase in value. It will fortify your finances. You’ve got huge debt because you can. Two: You are nearly at the peak of your career. The second half of your 40s is when, the averages say, you’ll be earning your highest salary. Make the most of that, without wasting it, because you’ll eventually spend a long time not working. Invest. Invest. Invest. Three: Your investments will start to pay off. If you’ve bought quality shares and property, know that they will reward you with capital growth and a growing income stream in the next decade and beyond. Four: Ride the super wave. When you entered your 40s, you were lucky if your super was one year’s salary. By the time you turn 50, it will be more like four times your salary, thanks to contributions and compounding. Superannuation will, magically, turn into something worthwhile. Five: Your babies, who are currently monsters, will blossom into adults, maybe even ones who like you. The mono-syllabic grunts will slowly disappear. The education you suffered to give them will produce some fish. They will get nice jobs and find nice partners. They might even leave home. It all happens because of your 40s. Don’t blow it. Make sure, while you’re on your knees sweating to pave the path of your future finances, that you smell some of those roses in your castle garden. And, though I’ve made some light of it, depression is bloody serious. If you’re feeling overwhelmed, see your doctor. Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au), a licensed financial adviser and mortgage broker. [email protected] Forty, indebted and grumpy — just keep hanging in there THE DECADE THAT COUNTS ■ Bruce Brammall DebtMan Not in my garage: There may not be a Porsche, a gym membership or an affair in sight but remember, your 40s, will deliver in spades. Hang in there. 5 YOUR MONEY thewest.com.au Monday, March 31, 2014 Thousands of WA families will be facing a $5-plus hit on their week- ly budget tomorrow thanks to in- creasing private health insur- ance premiums. According to research group Canstar, the average increase in annual health insurance costs for WA families will be $319 to $5472. The pain will be made worse because the Federal Government has limited indexation of the health insurance rebate so the maximum 30 per cent rebate will cover just 96.8 per cent of new premiums. Canstar chief Steve Micken- becker said people should not reduce their level of cover but in- stead shop around for the best deal, most suitable policy. He cited a 50-year-old being co- vered for obstetrics or a 30-year- old being covered for obstetrics as potential wastes of premiums. Health hike hits home tomorrow ■ Neale Prior When I first heard the word “in-specie”, it sounded to me like something out of the stuff of nightmares. The actual meaning of the phrase was more mundane than my overactive imagination had anticipated. An in-specie contribution is where a contribution is made into a self-managed superannuation fund that is not cash but ownership of an asset belonging to the fund member. So if you are short of cash but have assets, you can make contributions to your SMSF using your assets. However, not all assets can be contributed to a SMSF. The superannuation law allows only two types of assets, listed securities and business real property. Listed securities include shares, units, bonds, rights and options listed on the Australian Securities Exchange or other stock exchange. Business real property is land and buildings used wholly and exclusively in any business. The reasons these assets can be contributed into a SMSF is because the SMSF regulator, the Australian Taxation Office, can easily monitor them. It’s easy to work out the market value of these from various sources. The government also realises that small business owners usually put all the money their business makes back into the business. Usually when they retire, they sell the business and use the proceeds for their retirement. Therefore, if members of a SMSF own the land and building from which they operate their business, the land and building can be contributed to the SMSF. The property can then be leased back to the business. The super law also requires that if an in-specie contribution is made to a SMSF, the true market value of the asset is recorded in the SMSF’s financials. The law defines “market value” as an amount that a willing buyer of an asset would reasonably be expected to pay to acquire the asset from a willing seller if the following assumptions were made: ᔢ that the buyer and seller dealt with each other at arm’s length in relation to the sale; ᔢ the sale occurred after proper marketing of the asset, and; ᔢ that the buyer and seller acted knowledgably and prudently in relation to the sale. The tax office has published a document titled Valuation Guidelines for SMSFs as well as another document titled Market Valuation for Tax Purposes about how to value assets. So don’t just record any amount or an amount that you think the asset is worth. As a trustee of your SMSF, you will need to provide evidence to the tax office that the value of the asset you arrived at was based on objective and supportable data. If you are not sure whether a property would meet the definition of a business real property, please talk to a SMSF expert. Don’t assume that properties you own as investments can be justifiably claimed to be properties in a property investment business. If you try to claim a property is business real property, to form the basis of an in-specie contribution — and you are wrong — it could become the stuff of your nightmares. In my next article I will explain how an in-specie payment to a member of a SMSF satisfies the member’s superannuation benefit entitlement. Monica Rule worked for the Australian Taxation Office for 28 years and is the author of The Self Managed Super Handbook. She is an accredited SMSF adviser. www.monicarule.com.au A different kind of SMSF contribution super ■ Monica Rule
Transcript of thewest.com.au Monday, March 31, 2014 Forty, indebted and ......Mar 31, 2014 · the kids, biting...
�
Apparently, life begins at 40. Butthe party doesn’t last long. Soonafter, you sink into a well ofdepression.
So says a survey of twomillion people from 80countries. Our 40s is the peak ofour unhappiness.
Age 44, on average, is us at ourgrumpiest. We hit middle ageand get morose at our life beinghalf over. (Or perhaps that ourmiserable existence is only halfdone.)
Why? Mostly because ourteenage kids are feral monsters,work’s a drudge and the hoursare painful, the mortgage is stillmountainous. Financially,professionally and at homeeverything is harder than wethought it would be at this age.
You had dreamed of beingsomewhere by now. Just nothere. Bugger!
I’m 40-something. My workhours are stupid. My mortgageis an Everest, and growing, careof an addiction to propertyinvestment. But, personally, I’mnot feeling like drinking myselfinto a coma like Nicholas Cagein Leaving Las Vegas. (I just didthat for fun in my 30s.) Perhapsit’s because I started late and theDebtKids are just school-age andstill believe their dad knowseverything.
Maybe.But I would also credit it to
some words of wisdom I got onthe eve of turning 40. It wasfrom a lovely lady called Sue,who among the birthday wishesin an email, typed a line I’llnever forget.
“Your forties is when youmake it.”
A bizarrely simple statement.But incredibly right. I’d writtenan 80,000-word book (Debt ManWalking) based on thatsentiment.
And Sue had just summed up
my book in seven words.For most, the strain of life in
your 40s is what sets you upfinancially for your 50s andbeyond. The long hours, thesacrifices, taking on a biggermortgage to upgrade orrenovate, the struggle to paydown the mortgage, educatingthe kids, biting the bullet to buyinvestments . . .
No question, your 40s is hardwork. But depressing? Really?
The study was global. And thestatistics say it’s a worldwidephenomenon.
Sure, it can be hard whenyou’re in the thick of it, but keepan eye on the medium term. Thestudy said we get over it by 50.
For those on the wrong side of35, and approaching the“darkness” of being
middle-aged, or now living it,here are five things to focus on.
There’s not a Porsche, anaffair or a gym membership insight. It’s about understandingthe truth of Sue’s words: “Yourforties is when you make it”.The toil of this decade willdeliver, eventually, in spades.Suck it up. The sacrifice will beworth it.
One: Your home will becomeyour castle. Your huge mortgagewill reduce and your home willincrease in value. It will fortifyyour finances. You’ve got hugedebt because you can.
Two: You are nearly at thepeak of your career. The secondhalf of your 40s is when, theaverages say, you’ll be earningyour highest salary. Make themost of that, without wasting it,
because you’ll eventually spenda long time not working. Invest.Invest. Invest.
Three: Your investments willstart to pay off. If you’ve boughtquality shares and property,know that they will reward youwith capital growth and agrowing income stream in thenext decade and beyond.
Four: Ride the super wave.When you entered your 40s, youwere lucky if your super wasone year’s salary. By the timeyou turn 50, it will be more likefour times your salary, thanks tocontributions andcompounding. Superannuationwill, magically, turn intosomething worthwhile.
Five: Your babies, who arecurrently monsters, willblossom into adults, maybe even
ones who like you. Themono-syllabic grunts will slowlydisappear. The education yousuffered to give them willproduce some fish. They will getnice jobs and find nice partners.They might even leave home.
It all happens because of your40s. Don’t blow it.
Make sure, while you’re onyour knees sweating to pave thepath of your future finances,that you smell some of thoseroses in your castle garden.
And, though I’ve made somelight of it, depression is bloodyserious. If you’re feelingoverwhelmed, see your doctor. Bruce Brammall is the author of DebtMan Walking (www.debtman.com.au),a licensed financial adviser andmortgage [email protected]
Forty, indebted and grumpy— just keep hanging in there
THE DECADE THAT COUNTS
■ Bruce BrammallDebtMan
Not in my garage: There may not be a Porsche, a gym membership or an affair in sight but remember, your 40s, will deliver in spades. Hang in there.
5YOUR MONEYthewest.com.auMonday, March 31, 2014
Thousands of WA families will befacing a $5-plus hit on their week-ly budget tomorrow thanks to in-creasing private health insur-ance premiums.
According to research groupCanstar, the average increase inannual health insurance costs forWA families will be $319 to $5472.
The pain will be made worse because the Federal Governmenthas limited indexation of thehealth insurance rebate so themaximum 30 per cent rebate willcover just 96.8 per cent of newpremiums.
Canstar chief Steve Micken-becker said people should notreduce their level of cover but in-stead shop around for the bestdeal, most suitable policy.
He cited a 50-year-old being co-vered for obstetrics or a 30-year-old being covered for obstetricsas potential wastes of premiums.
Health hikehits hometomorrow■ Neale Prior
When I first heard the word“in-specie”, it sounded to melike something out of the stuff ofnightmares.
The actual meaning of thephrase was more mundane thanmy overactive imagination hadanticipated.
An in-specie contribution iswhere a contribution is madeinto a self-managedsuperannuation fund that is notcash but ownership of an assetbelonging to the fund member.
So if you are short of cash buthave assets, you can makecontributions to your SMSFusing your assets. However, notall assets can be contributed to aSMSF. The superannuation lawallows only two types of assets,listed securities and businessreal property.
Listed securities includeshares, units, bonds, rights andoptions listed on the AustralianSecurities Exchange or otherstock exchange. Business realproperty is land and buildingsused wholly and exclusively inany business.
The reasons these assets canbe contributed into a SMSF isbecause the SMSF regulator, theAustralian Taxation Office, caneasily monitor them. It’s easy towork out the market value ofthese from various sources.
The government also realisesthat small business ownersusually put all the money theirbusiness makes back into thebusiness. Usually when theyretire, they sell the business anduse the proceeds for theirretirement.
Therefore, if members of aSMSF own the land and buildingfrom which they operate theirbusiness, the land and buildingcan be contributed to the SMSF.The property can then be leasedback to the business.
The super law also requires
that if an in-specie contributionis made to a SMSF, the truemarket value of the asset isrecorded in the SMSF’sfinancials. The law defines“market value” as an amountthat a willing buyer of an assetwould reasonably be expected topay to acquire the asset from awilling seller if the followingassumptions were made:� that the buyer and seller dealtwith each other at arm’s lengthin relation to the sale;� the sale occurred after propermarketing of the asset, and; � that the buyer and seller actedknowledgably and prudently inrelation to the sale.
The tax office has published adocument titled ValuationGuidelines for SMSFs as well asanother document titled MarketValuation for Tax Purposesabout how to value assets.
So don’t just record anyamount or an amount that youthink the asset is worth. As atrustee of your SMSF, you willneed to provide evidence to thetax office that the value of the
asset you arrived at was basedon objective and supportabledata.
If you are not sure whether aproperty would meet thedefinition of a business realproperty, please talk to a SMSFexpert.
Don’t assume that propertiesyou own as investments can bejustifiably claimed to beproperties in a propertyinvestment business.
If you try to claim a propertyis business real property, toform the basis of an in-speciecontribution — and you arewrong — it could become thestuff of your nightmares.
In my next article I willexplain how an in-speciepayment to a member of a SMSFsatisfies the member’ssuperannuation benefitentitlement. Monica Rule worked for theAustralian Taxation Office for 28years and is the author of The SelfManaged Super Handbook. She is anaccredited SMSF adviser.www.monicarule.com.au
A different kind of SMSF contribution super
■ Monica Rule
