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Devising an SMSF investment strategy

Posted on May 24, 2016 by admin

An investment strategy is fundamental when it comes to self-managed super funds. Not only is having one a statutory requirement, but it also helps SMSF trustees know what to invest in to meet the fund’s investment goal.

Above all, an SMSF investment strategy must be designed to help trustees reach their retirement goal.

To do this, the strategy must outline the fund’s objectives. Every fund’s objective will be different and should reflect the circumstances of each fund member. For example, it must take into account the age and when each member plans to retire, existing assets inside and outside of super, each member’s current and future salary and ability to contribute to the fund. Importantly, it must also factor the ability of the fund’s assets to be sold within a specific time frame.

Taking into account the risk profile of each fund member will help the strategy determine what the fund invests in. In cases where the risk profile of each member differs, individual asset pools should be created to reflect individual members’ risk preferences.

SMSF strategies need to be reviewed regularly, especially during important life events, like when a member enters retirement, suffers from an illness, goes through a divorce or passes away. These events can have a substantial effect on how a fund operates e.g. if a member dies, a fund’s asset allocation may need to change so that the fund holds fewer high-risk assets.

While there is no such thing as a ‘one size fits all approach’ when it comes to an SMSF’s investment strategy, it is essential for a strategy to consider the elements such as the ones discussed to ensure the fund complies with regulations and meets member needs in retirement.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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