Question: My SMSF is in pension mode and most of the funds are invested in high-dividend shares as income is a priority, although I have a few shares that I have bought for growth as well. Two of these are Sonic Healthcare (SHL) and Carsales (CAR), which I bought at $18.52 and $10.45 respectively early in 2015. I’m wondering if I should continue to hold these shares? What do you see long term for them?
Answer (by Paul Rickard): I think you have to ask yourself – what are you going to do with the funds?
If you have better stocks to invest in, or are worried about the market, then maybe you should take profits. However, I don’t see any material reasons why you should be concerned about holding these stocks for the long term.
Sonic has a bit of regulatory risk to deal with, but that said, has a pretty sound business model.
Going to the major brokers and their views, they rate as follows:
Sonic (SHL): sentiment neutral at -0.1 (scale -1.0 is most negative to +1.0 is most positive); consensus target price is $21.83 (current $20.84);
Carsales (CAR): sentiment +0.3; consensus target price is $12.24 (current $11.48).
Question: Could you please explain the implications of new rules (assuming that they pass the senate) on someone who has an SMSF as well as a defined benefit pension?
Answer (By Paul Rickard): As you correctly noted, the legislation has not been introduced into Parliament yet. In fact, we only have draft legislation, that is currently going through a public consultation period.
Recipients of defined benefit pensions could be impacted in one of two ways:
- If the benefit is from a taxed source and exceeds $100,000, then 50% of any excess over $100,000 would be included in your assessable income and taxed at your marginal rate (currently – all payments are tax free to persons aged 60 or over);
- If from an untaxed source, the current 10% tax offset will be limited to the first $100,000. Income in excess of $100,000 will not be eligible for the tax offset.
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 regards to your circumstances.