Question 1: My wife and I are trustees in a SMSF. I am 68 and receiving a part-aged pension whilst my wife is not working and is turning 65 later this year. She is in “accumulation phase” because if she was “retired”, our joint assets would exceed the current aged pension qualification limits. My wife also has a small portfolio of income stocks that she derives dividends and currently receives franking credits at present.
I am quite concerned because I thought that retired people on government pensions like myself (and their partners) would be exempt from the ALP’s new taxation changes, according to initial newspaper reports. Will we be affected by Labor’s new “Retiree Tax” in our SMSF, and individually for my wife with her small stock portfolio outside of superannuation?
Answer: I don’t think I can give you a definitive answer because the ALP has yet to articulate the detailed rules behind how the exemptions will work. This is not uncommon with changes of this nature – there will be a lot of “fine print” to be worked out.
You currently qualify for a part aged pension because your wife is under pension age and her super is not counted in the assets or income test. When she reaches pension age (66 years), this changes and her super will be counted in the assets test (which will be assessed as a couple). Based on what you have said, you will then cease to be eligible for a part aged pension.
While the ALP announced an exemption from their policy for SMSFs where one member was receiving a government benefit (as at 26 March 2018), and for individuals who are receiving a government benefit, a case such as yours where you were exempt, but then lose the benefit that was making you exempt, has not been covered.
My expectation is:
- Your wife won’t be exempt (and therefore won’t get cash refunds) because she won’t qualify for a pension; and
- Your SMSF will be ineligible as you (the member) will cease to receive a government benefit.
Question 2: I am wondering if BUB is a good buy and at what entry price?
Answer: I would say no, but I am a pretty conservative investor. Bubs Australia (BUB), a producer of goat milk products for the infant market, is caught up in the whole dairy/China/organic foods “bubble”. That’s not to say that sales aren’t growing rapidly – but its recent share price lift-off just looks like momentum buying. It has run up very quickly from $0.80 to $1.20.
According to its cash flow statement lodged on Wednesday, revenue reached $7m in March. Annualising this takes it to $84m. With a market capitalisation of around $610m, that is a ratio of around 7 times market cap.
If I had to price level, I would say a low closer to the recent placement price (just a few weeks ago) of 65c.
Only one of the major brokers (Morgans) covers the stock. Admittedly they are a few weeks old with their valuation, but they put it at 45c in early March.
Question 3: Have you considered running a model portfolio of ETF’s? We all need global exposure and I expect many subscribers would be happy with a portfolio that matched the indexes and also provides a fairly low maintenance option?
Answer: I have been a little reluctant to do this for two reasons:
- Asset allocation for a “growth” investor is going to be quite different to a “conservative” investor or to an “income” focussed investor, so I would have to run several different models and;
- One of the challenges with passive ETFs is that they guarantee an “index minus” return. I think they can be useful in some circumstances – but I believe active management can add value.
I will take your suggestion on board.
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