The start of 2015 is the best time for Self-Managed Superannuation Fund (SMSF) check-up. For at least twice a year, it is important to review your SMSF and one of the best times for a bi-annual check is the beginning of the calendar year. It is also crucial to make sure that your asset allocation target is achieved. To do this, a few administrative tasks needs to be accomplished first.
To ensure that you do not exceed the concessional or non-concessional limits, you need to do a quick calculation of how much you have contributed to your superannuation so far this past financial year. Having an understanding on this enables you now to be better prepared for the next six months.
Below table indicates the limits for the recently raised different age brackets.
The bring-forward cap is 3 times the non-concessional contributions cap of the first year.
Looking at groundwork such as the trust deed, and within that, your investment strategy document, is also a great action to do at this time of the year.
You can ask yourself the following questions:
- How long since you have updated it?
- Are there any changes made during the year that was not included yet in your trust deed?
- Does your investment strategy capture any major changes that happened in the past 12 months?
- Is there a change in your overall market view? If so, is this change included on your investment strategy?
You may have a member who starting up a transition to retirement pension as they move over a number of years or even planning to retire sometime this year. If this is the first member that the fund will start paying pension to, you need to have the right documents in place. These documents include an actuary’s certificate. It is important to make the needed appointments to ensure that all pensions will go smoothly when you need to start them.
In addition, if you are paying a transition to retirement pension, there is a maximum payment threshold of 10%. This 10% maximum pension rule is also applicable in the year that the transition to retirement pension begins. For instance, if your pension started on 1 January, the maximum 10% income rule applies in the period between the date the pension began and the end of the pension’s first financial year.
You may think that you should consider investing bonds, or perhaps, you might think that you should have more allocated to international shares. Make sure that you document whatever you do to start with your overall allocations to individual asset classes in your investment strategy.
You should also make sure that your sector allocations within your equity holdings have not changed too much. For instance, if there are any big jump or fall in one particular stock, this might have affected some sector allocations. Hence now is the best time to re-adjust to your original strategic goals.
Please note that it is essential to review your understanding of the most important part of the Australian market.
There should be a target that is measured against a benchmark included your investment strategy. However, these benchmarks can also change depending on many factors.
Below table, from the Standard and Poors ASX 200 Sector Weights data generated as of 30 December 2014, shows that the Australian market is quite heavy in financials:
Investor psychology shows that we are more likely to hold on to losing stocks than sell the winning ones. But you should start 2015 fresh. You might as well bite the bullet and make selling your dog stocks a New Year’s resolution. This is a great opportunity to cut ties with these stocks and investments that generated no profit or income for you over the past year.