Question: I have always been cautious about investing in overseas companies mainly because I don’t have enough information about them and also because of the future exchange rates, which are a risk. However, I am interested in three Chinese companies, Tencent, Alibaba and Baidu. What information can I get about them and is it worth investing in them. I am a self-funded retiree and do not like to take too many risks but feel that I may be missing out on an opportunity.
Answer (By Paul Rickard): Legally, I can’t advise you whether to buy those three Chinese companies without a full understanding of your financial situation, investment objectives or particular needs.
That said, given that you describe yourself as “cautious”, investing directly in overseas shares may be a long step and you may be more comfortable in investing indirectly through an exchange traded fund (ETF) or managed fund that takes on this style of exposure.
If you want information on these companies, you can try broker websites (which offer trading access, such as nabtrade), news sites such as CNBC or Bloomberg or Reuters.com – which will give you access to consensus recommendations and targets, as well as individual company websites.
Question: My husband and I are 59 years old and turn 60 in the 2018/19 financial year. We have an SMSF and are thinking of doing TTRs. I work part time and my husband works full time and we both salary sacrifice $500 each per month into our SMSF. Both our tax brackets fall in the 32.5% tax bracket. My understanding is that there are new rules in regards to TTR.
Answer (By Graeme Colley): The new rules that apply to TTR pensions is that any income and taxable capital gains earned on investments used to support the TTR pension is taxed in the fund at 15%. Any TTR pension paid to you continues to be taxed in your hands as it was prior to that time. That is, if you are under 60 the taxable component of your TTR pension is taxed at your personal tax rates less a tax offset of 15% and once you reach 60 any TTR paid after that time is tax free.
Do we continue with the accumulation phase and not separate our assets out in the fund?
It is totally up to you how much of your superannuation balance you use to pay the TTR and how much you leave in accumulation phase. The more you use to pay the TTR pension the greater the amount you are required to take as a minimum TTR pension each year. The income on investments owned by the fund are taxed at 15% less any franking credits.
Do we need to get an actuarial report on our member balances before commencing TTR?
If the fund has only accumulation accounts and TTRs for members, there is no requirement for an actuarial certificate to be obtained for the fund. The only exception is the requirement for an actuarial certificate where at least one member has a total balance in all superannuation funds of more than $1.6 million.
If we started taking monies out before our 60th birthdays but still in the 2018/19 financial year, would the fund need to withhold income tax of 15%?
If you withdraw a TTR prior to reaching 60 the taxable portion of the TTR is taxed at personal rates and is eligible for a 15% tax offset. The amount of tax deducted by the fund on the TTR is based on personal tax rates less the tax offset. A tax schedule to calculate the amount of tax payable is available from the ATO’s website.
What is the minimum and maximum amounts that can be withdrawn each year?
The minimum amount of a TTR that is required to be paid is equal to 4% of the balance of the pension on 1 July in each year. If the TTR commences or ends part way through the year the minimum amount is pro-rated on a daily basis.
The maximum amount of a TTR required to be paid is 10% without any pro rating if it commences or ends part way through the year.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.