Question: What is your gut feeling with CSL? Do I bail out or buy more?
Answer (By Paul Rickard): I have never thought of “bailing” out of CSL. They are on my “buy” list.
You need to ask yourself the following questions:
- Why did you buy them?
- What was your expected holding period?
- What level of pain is uncomfortable?
According to FN Arena, of the major brokers, there are two buy recommendations and six neutral recommendations. Target price is $216.58.
Question: My understanding of the rules of super is that for a ‘sole trader’ or ‘partnership’ small business, we will not meet a condition of release (either at our preservation age or aged 60), unless we actually wind up our business. Is that correct?
We would like to keep our business name going but stop working for our big clients, and just take on little bits of work every now and then to supplement our super, working less than 10 hours a week. Why should we have to close our business down to do this?
We would also like to be able to access our super funds in the coming years to undertake a recontribution strategy and also to spend lump sums on a new vehicle and home renovations.
Answer (By Graeme Colley*): The superannuation legislation provides two definitions of ‘retirement’ for the payment of benefits. The first applies to anyone between their preservation age (currently 57) and until they reach 60. The second applies to anyone from age 60 until they reach age 65.
Between preservation age and age 60, retirement takes place when the member has ceased to be gainfully employed and, at the time gainful employment has ceased, that the member intends never to become employed for 10 or more hours each week. Once a person reaches age 60, retirement occurs if at least one gainful employment has come to an end. When a person reaches age 65, there is no restriction to the payment of superannuation.
Under the rules, gainful employment is where a person is employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
Where a person is in an employer/employee relationship, it ceases where he/she has fully and effectively terminated that employment. They are then free to obtain employment with another employer, if they choose. However, if the person is self-employed, retirement occurs when that self-employment ceases. It can be difficult to determine when self-employment has ceased, as in some situations the work may continue at a reduced level. However, there may have been no cessation of self-employment.
In these situations, superannuation can not be paid from the fund, until the self-employment has ceased, or the member has reached age 65, whichever occurs first. If the person is between 60 and 65, and takes on part-time or casual employment for a short period, they would be considered retired for superannuation purposes. An alternative could be to cease self-employment and commence employment in a family company. It is suggested that if you propose to make this change, that you seek professional advice.
A similar situation applies where a person has never been ‘gainfully employed’, for example, for a person who has only ever been a passive investor, superannuation benefits could not be paid until 65. The reason is that the person would not be able to retire from that activity under the superannuation legislation.
*Graeme Colley, executive manager, SMSF technical and private wealth with Super Concepts.
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.