Question 1. With the Federal Election looming ever closer and the strong probability of Labor winning, my question is: I have an SMSF all in pension phase, no concessional contributions. Could one commute part of one’s pension back to accumulation phase so as to use the franking credits that would be otherwise lost to Labor’s policy change? If one was currently receiving around $5,000 to $10,000 in franking credits, how much would you have to roll back?
Answer (by Paul Rickard). If you were eligible to make a contribution (capped at $25,000), then you could apply those franking credits to reduce or eliminate the 15% tax on the contributions. Contributions are automatically are applied to the accumulation part of super until you elect to commence a pension. Moving money from a 0% tax state (pension) to a 15% tax state (accumulation), and then applying those franking credits to bring it back to a 0% tax state, won’t achieve any net benefit.
Question 2. I have enjoyed being a holder of WAM Capital (WAM), but at present it seems to be on a down run. Should I continue to hold?
Answer (by Paul Rickard): Yes, it is on a down run. Some of the gloss has come off the performance and the premium to NTA is still too high. I think the latter is unsustainable – and on this basis, it is a sell. Further, if you are worried about the impact of a possible change to franking credits (as proposed by Bill Shorten), LICs trading at a premium are particularly vulnerable.
Question 3. I’d like to ask about YMAX Yield Maximiser Fund from Betashares. I’m looking at ways to try and increase the yield on my super fund. What are your thoughts please?
Answer (by Paul Rickard): The fund pays a high income, but this appears to come at the expense of capital. It has underperformed versus the ASX 20 index: -3.21% vs -0.35% over last 12 months; 1.79% pa vs 3.75%pa over last 5 years.
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.