A Self-Managed Super Fund (SMSF) offers unparalleled flexibility and control over your retirement savings.  

But with great control comes responsibility.

Understanding the diverse investment options available and how they align with your financial goals is essential. Whether you want to maximise returns, manage risk, or navigate tax-efficient strategies, the right SMSF investment approach can significantly impact your retirement plan.

For the uninitiated, the multitude of options and complexities can seem overwhelming. But with expert guidance, you can tailor an investment strategy that suits your risk tolerance and objectives, ensuring your wealth grows steadily.

We’ll explore key SMSF investment options and how to make them work for you and your retirement plan.

Core Investment Options in an SMSF

One of the key benefits of an SMSF is the ability to choose from a wide range of investment options. Generally, SMSFs should include a diverse range of investments from primary asset classes.

Direct Property

Investing in property through an SMSF can be highly rewarding, with potential for capital growth, rental income, and tax benefits. SMSFs can invest in commercial or residential property (under strict conditions). However, property investment comes with high initial costs, ongoing management, and illiquidity risk, as properties cannot quickly be sold for cash. It’s also important to understand that residential property can only be leased to related parties, including family members if used exclusively in a business.

Shares

Shares are popular for SMSF investors seeking high returns and diversification opportunities. They provide the potential for capital growth and dividend income. However, shares are subject to market volatility, and managing a share portfolio requires solid market understanding. While dividends can offer tax advantages through franking credits, investing in shares also means taking on the risk of market fluctuations that can erode your capital.

Bonds

Bonds offer a lower-risk, steady income stream than shares, making them a good option for risk-averse investors. They can add diversification to your portfolio, especially during market uncertainty. However, their returns tend to be lower than shares, and they are sensitive to interest rates and inflation, which can diminish their value over time.

Managed Funds

Managed funds pool money from multiple investors to create a diversified, professionally managed portfolio. This option provides access to various investment strategies and asset classes, such as shares, bonds, and property. While managed funds offer professional management and diversification, the downside is that they come with management fees — and investors don’t have control over individual investments.

Cash

For those seeking safety and liquidity, cash investments such as term deposits are a stable, low-risk option within an SMSF. While they provide a safe haven during market downturns, cash investments offer minimal returns, especially in an inflationary environment. Despite this, cash holdings can be necessary to ensure your fund has sufficient liquidity to meet expenses and member benefit payments.

Alternative Investments: Expanding Your SMSF Portfolio

While the core assets are vital to any SMSF portfolio, alternative investments offer unique opportunities for growth and diversification.

Precious Metals

Gold and other precious metals can be a hedge against inflation and a store of value. They’re particularly attractive during times of economic uncertainty. However, precious metals can be volatile and incur storage costs, so their use in SMSFs requires careful consideration.

Infrastructure and Private Equity

Investing in infrastructure, such as toll roads or airports, offers the potential for long-term stable returns. Similarly, private equity investments can offer high-growth potential but tend to be illiquid and high-risk. These alternatives can complement a diversified SMSF portfolio, particularly for those looking to enhance returns while managing risk.

Commercial Property

Investing in commercial property via your SMSF can generate significant income and long-term capital growth. Using an SMSF to purchase commercial property is a popular strategy for business owners. It allows for renting the property back to the business, providing tax benefits while securing a tangible asset.

Cryptocurrencies

While Cryptocurrency is also an option, investments are highly speculative and volatile. Potential for significant returns exists, but this choice is high-risk and may not be suitable for most individuals. If you decide to include cryptocurrencies in your SMSF, ensure you understand the regulatory landscape and risks involved, including security threats and regulatory changes.

Building a Diversified SMSF Portfolio

Creating a diversified SMSF portfolio is essential to managing risk and optimising returns. Diversification spreads your investments across various asset classes, ensuring that no single investment dominates your portfolio.

The goal is to reduce the risk of significant losses while taking advantage of different asset performance trends.

When building your SMSF portfolio, assessing your risk tolerance and time horizon is crucial. If you’re nearing retirement, you may prefer lower-risk investments that provide stable returns, while younger investors might focus more on growth assets like shares and property. Regularly rebalancing your portfolio ensures it remains aligned with your goals and risk profile.

Seek Specialist Advice to Maximise Your SMSF

Given the complexities and regulations surrounding SMSF investments, seeking expert advice is essential before making any decisions. A financial planner with experience in SMSFs can help you navigate the rules, avoid common pitfalls, and structure your fund to maximise tax benefits and returns.

At Collective Wealth Advisers, we specialise in SMSF management and can provide the tailored advice you need to optimise your investment strategy. Whether you’re just starting out or looking to refine your existing portfolio, we’re here to help you maximise your SMSF and secure your retirement goals.

The flexibility of an SMSF offers excellent potential for growing and preserving wealth, but it’s essential to understand the full range of investment options and their implications.

If you’re considering setting up or reviewing your SMSF, contact us today to schedule a Welcome Meeting and take the next step toward a more secure retirement. Let us help you make your SMSF work for you.

Retirement brings a new chapter of freedom, but that freedom will depend on financial security. Figuring out how much you’ll need is complex — estimate too low, and you could face a lifestyle cutback in your golden years; aim too high, and you might work longer than necessary.

Determining an accurate retirement savings goal gives you a realistic view of how much to save, how to invest, and when you might comfortably retire. 

The key is finding a balance.

According to the Association of Superannuation Funds of Australia (ASFA), a couple seeking a “comfortable” retirement will need approximately $73,337 annually. In comparison, a single person will need around $52,085.

These figures, however, are guidelines and don’t account for personal factors like health, family needs, or lifestyle choices, meaning your individual retirement goal will vary.

Here, we’ll break down how to calculate an accurate retirement goal, explore variables that impact your savings target, and help you confidently approach this crucial planning step.

Consider Your Desired Retirement Lifestyle

Retirement lifestyles vary widely. Start by asking, “What kind of retirement do I envision?” Your answer impacts the financial target you’ll need to aim for.

If a comfortable lifestyle is what you’re seeking — with a mix of travel, dining out, and regular leisure activities — ASFA’s benchmark annual cost estimates are approximately $73,337 for couples and $52,085 for singles. Bear in mind that these figures assume home ownership and relatively low healthcare costs.

On the other hand, a modest lifestyle prioritising the necessities and expecting fewer luxuries and some discretionary spending is estimated to cost around $47,731 per year for couples or $33,134 for singles.

From here, you can estimate annual expenses and multiply this by the years you’ll likely spend in retirement. Planning for at least 20 to 30 years is typically recommended — especially as life expectancy increases. Consider any health factors that may come into play, and always plan for a longer life than expected to avoid falling short in your later years.

Factor in Healthcare and Aged Care Costs

Healthcare and aged care are significant expenses that increase as we age. The average annual cost of aged care is currently $41,799 — and could be significantly higher depending on the resident’s needs.

It’s also worth considering the significant reforms to aged care announced this year, where new entrants to residential care would make larger means-tested contributions based on their income and assets.

Medicare covers some healthcare expenses, but costs like private health insurance, medications, and potential aged care fees are crucial to consider.

A good rule of thumb is to set aside a portion of your superannuation or investments specifically for health-related costs. Allocating a buffer for unexpected expenses provides peace of mind and ensures you don’t deplete savings prematurely.

Estimate Income from Superannuation and Other Investments

Your superannuation will likely be a primary retirement income source, so understanding how to optimise it is essential. ASFA suggests that individuals retiring at 67 with a balance of $595,000 (couples $690,000) could fund a comfortable retirement. 

Here are some tips to make your super work harder:

— Salary sacrifice and concessional contributions (such as personal deductible contributions) can be tax-effective ways to grow your super.

— Review asset allocation within your super to ensure it’s aligned with your risk tolerance and time horizon.

— Consider setting up an income stream like an account-based pension to allow regular withdrawals without depleting your capital too soon.

For those with additional investments (e.g., property, shares), it’s essential to calculate the expected returns and factor them into your retirement income. Diversification across assets can protect against market downturns and support a steady income.  

Calculate How Much You’ll Need to Withdraw Annually

To maintain your lifestyle, estimate how much you’ll need to withdraw from your savings annually. Many financial advisers suggest following the 4% rule, which means withdrawing 4% of your total retirement savings each year to ensure it lasts 25-30 years. Please note that if you have an account-based pension, there is a compulsory minimum drawdown rate based on your age.  

If you require around $50,000 annually in retirement, you may need a minimum nest egg of $1.25 million. However, this amount can vary significantly depending on your retirement age, lifestyle, and other personal circumstances. Working with a financial planner is key for a more accurate and personalised estimate. They can use advanced financial modelling based on your unique financial position and goals to help ensure your retirement plans are realistic and sustainable.

However, a higher amount may be necessary if you have high healthcare costs, wish to leave a legacy, or plan to pursue an active retirement lifestyle.

Remember to account for inflation when calculating your annual spending.

Inflation erodes purchasing power over time, so adjusting your retirement savings goal is crucial. A 2-3% annual inflation rate can double your expenses over 25 to 30 years. For instance, a $50,000 yearly budget today would increase to around $83,000 in 25 years to maintain the same lifestyle.

To hedge against inflation, allocate a portion of your portfolio to growth assets like stocks or property, which historically offer returns that outpace inflation.

Regularly Review and Adjust Your Goal

Your retirement plan should adapt as life changes. Review your savings and investments every few years to ensure they’re on track.

Engaging with a financial adviser can provide valuable insights and allow you to adjust based on new goals, market conditions, or changes in health.

To lower the mental burden, Collective Wealth Advisers’ WealthTrack Program can be an excellent resource. This strategy involves regular progress meetings to help you align your savings plan with your retirement goals. Ongoing support lets you stay accountable, adjust for changes, and gain peace of mind.

The Bottom Line

Building a retirement strategy can feel overwhelming, but it’s a powerful way to ensure you’re set up for a comfortable, worry-free future.

If you take anything from this article, it should be the following:

— There’s no one-size-fits-all number: Everyone’s retirement goal will differ based on lifestyle choices, health, and family circumstances.

— Healthcare costs and inflation matter: Plan for medical expenses, long-term care, and inflation to avoid shortfalls later in life.

— Seek professional guidance: A tailored retirement strategy and regular check-ins with a financial planner can help ensure you’re financially secure when it matters most.

If you’d like assistance calculating your retirement needs, Collective Wealth Advisers is here to help. Our team is dedicated to providing clear, informed guidance every step of the way.

Contact us to book your Welcome Meeting and build a retirement plan tailored to your aspirations and security needs.

Salary sacrificing into your superannuation is a smart way to both grow your retirement savings and cut down on your tax liabilities. In this video, our Senior Financial Planner, Ryan, breaks down how this strategy works and its key benefits, including:

— What salary sacrifice is and how it allows you to contribute pre-tax income to your super.

— How it can reduce your overall tax bill while increasing your retirement savings.

— Important contribution caps to stay within, so you avoid penalties.  

— The tax advantages of salary sacrifice contributions, which are generally taxed at a lower rate than your regular income.

If you’re looking to maximise your retirement savings while minimising tax, salary sacrifice could be a great option. Watch the video to learn more and see if this strategy is right for you.

Contact Us to explore how salary sacrifice can fit into your financial plan.

Planning for retirement can be overwhelming, but it’s one of the most important steps to ensure financial security in your later years. Without a solid plan, retirees may face unexpected challenges like struggling to cover rising living expenses or being unable to lead a lifestyle they’re accustomed to. We’ve seen firsthand how thoughtful planning can transform your retirement experience. In this blog, we’ll walk through five common mistakes to avoid as you approach retirement, giving you the confidence to secure a stable financial future.

Mistake #1: Jumping the Gun

Retiring too early without sufficient superannuation can put a strain on your finances. Many people underestimate how long their retirement savings need to last. With Australians living longer than ever — life expectancy is currently 85 for women and 81 for men — it’s essential to ensure your savings are enough to cover 20 to 30 years.   

Retiring without enough super or income sources can force you to make significant lifestyle adjustments or even return to work. It’s vital to assess whether you’ve built up enough superannuation or other income sources before you take that step into retirement.

Mistake #2: Forgoing a Retirement Plan

Retirement is not the time to “wing it.” Having a clear retirement plan ensures that you have a roadmap for managing your finances, lifestyle, and health. A retirement plan should account for your income streams (super, pensions, investments), your expenses, and your long-term goals.

According to research conducted by the Association of Superannuation Funds of Australia (ASFA), only half of adults in Australia have sought information on preparing for retirement. Without proper guidance, you may struggle to manage your expenses or miss out on tax-saving strategies. Establishing a retirement plan early on can help you navigate unexpected costs and ensure your superannuation lasts.

Mistake #3: Under-appreciating Inflation

Inflation can significantly erode the purchasing power of your savings over time. Many retirees make the mistake of not considering how rising costs will impact their retirement. Even a modest inflation rate of 2-3% can have a major effect on your expenses over a 20- to 30-year retirement. 

For instance, if your living expenses are currently $50,000 per year, they could rise to over $90,000 in 20 years with 3% annual inflation. Incorporating inflation protection into your financial plan is essential to maintaining your quality of life.

Mistake #4: Not Topping Up

We get it, life is unpredictable and it’s difficult to make additional contributions to your super. Whether it’s to cover medical bills, education costs, or other unexpected expenses, there are often reasons not to make an extra payment.

However, refraining from topping up your superannuation when you have the chance will reduce the potential for your retirement fund to grow. The power of compound interest means that extra contributions can dramatically increase your overall superannuation because funds compound as additional returns are earned.  

The non-concessional contributions cap is currently set at $120,000 — meaning you can contribute up to this amount each year without being subjected to extra tax. However, you can trigger the bring-forward rule to access non-concessional contributions caps from future years to contribute over $120,000 during a financial year without generating excessive contributions and paying additional tax. Keep this in mind if you’re looking to contribute a lump sum — an inheritance, for example. 

If you’re over 55 and are planning to sell your home, you could also benefit from Downsizer Super Contributions. In this instance, up to $300,000 from the sale of your home could be used to boost your superannuation fund without counting towards the contribution cap.

According to ASFA, a comfortable retirement lifestyle for singles requires a minimum of $49,462 annually. Even making small, consistent contributions will help to build long-term financial security and increase the likelihood that you have enough super for a comfortable retirement.

Mistake #5: Forgetting an Emergency Fund

An emergency fund is critical in retirement, especially with the increased likelihood of higher medical expenses. The risk of illness and injury rises with age, making it essential to have extra funds set aside for unexpected health-related costs. Without an emergency fund, you could be forced to dip into your superannuation, reducing the amount available for your daily living expenses. 

Aim for a fund that can cover at least six months of living expenses, and make sure it’s separate from your investment and super accounts for easy access.  

Strategies for a Strong Financial Future

Planning ahead is key to avoiding these common mistakes in retirement. There are many strategies and habits you can implement to ensure you’re setting yourself up for a comfortable retirement. Our WealthTrack Program has been carefully designed to help you navigate the complexities of retirement planning — keeping your financial strategy aligned with your evolving goals and changing circumstances. 

Some key actions we encourage our clients to follow include:

Managing Debts  

Entering retirement with high levels of debt can drain your retirement savings. Focus on paying down non-deductible debts like credit cards or personal loans. Keeping debt to a minimum will free up more of your superannuation and pension income for living expenses and leisure.

Budgeting Your Expenses  

Track your expenses and adjust your spending according to your retirement goals. Ensure your budget includes all necessary living costs, leisure activities, and unexpected health expenses.

Controlling Your Superannuation  

Once you’re eligible, consider converting your super into an account-based pension, which allows you to withdraw income while your earnings become tax-free. Keeping your super in an accumulation account means your investment earnings will be taxed at 15%. By converting to a pension, you eliminate that tax burden, maximising your savings.  

Leveraging Government Benefits  

Applying for the Age Pension as soon as you’re eligible is a great way to supplement your superannuation income. Depending on your assets and income, you could qualify for a full or partial pension. This can provide an essential income stream to support your retirement lifestyle.  

From staying consistent with your contributions to developing a retirement plan and accounting for inflation, mindful actions today can make all the difference tomorrow. A carefully considered financial strategy can help ensure your superannuation doesn’t fall short. By working with an expert adviser, you can optimise your retirement fund and enjoy the lifestyle you’ve worked hard to build.   

Should you decide to join our WealthTrack Program, we’ll regularly review your financial strategy through progress meetings and ensure that your retirement goals remain on track.

For more guidance on securing your financial future, contact Collective Wealth Advisers today. We’re here to help you navigate the complexities of retirement planning with confidence.

Retirement is a time to enjoy the fruits of your hard work and not worry about complicated tax obligations. However, changes to income streams can add a layer of confusion to tax time. As a retiree or someone nearing retirement, understanding your obligations is important to avoid unexpected penalties.

In this guide, we’ll break down what happens to your tax return once you retire and the best ways to approach tax post-retirement.

Do I Have to Pay Tax Once I’ve Retired?

For some retirees, a tax return may not be required. If your only source of income is the Age Pension or a similar government pension, you’re typically not required to lodge a tax return. However, you must still inform the ATO by submitting a non-lodgement advice form (read on for more details on completing this).

However, it’s not always that simple. You may still need to lodge a tax return in retirement if you’re receiving income on top of your pension payments — such as investments, part-time work, income from a business, or rental income.

The threshold for assessable income is currently set at $18,200, less any applicable tax offsets like the Seniors and Pensioners Tax Offset (SAPTO). Additional income streams that could push you over this threshold include:

• — Investment income
• — Part-time employment
• — Income from a business you own
• — Rental income from investment properties
• — Inheritance, insurance payouts, or compensation
• — Foreign income

If your total income surpasses the tax-free threshold, you’ll be required to lodge a tax return.  

Tax Offsets for Retirees

As a retiree, tax offsets can significantly reduce or eliminate your tax liability. Two key offsets to consider include the Seniors and Pensioners Tax Offset (SAPTO) and the Superannuation Income Stream Tax Offset.  

Seniors and Pensioners Tax Offset (SAPTO)

SAPTO is designed to reduce the amount of tax you need to pay. If you’re eligible, it could mean that even with additional income, you won’t have to lodge a tax return. To qualify, you must either:

• — Be eligible to receive the Age Pension or Department of Veterans Affairs (DVA) Pension, or
• — Pass a rebate income threshold test that determines your entitlement to a full or partial offset.

 

Superannuation Income Stream Tax Offset

While many retirees enjoy tax-free income from their account-based pension accounts, the Superannuation Income Stream Tax Offset applies in some cases. This tax offset typically applies to those receiving Defined Benefit schemes, such as the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation (PSS) — lifetime, indexed pensions provided by the government.

Additionally, the offset may apply if you start drawing an income stream from your Superannuation before turning 60, such as through a disability pension.

In the above cases, you may be entitled to a tax offset. This can be 15% of the taxed element or 10% of the untaxed element.

The exact tax offset amount for the taxed element will be detailed on your PAYG payment summary. However, for the untaxed element, the offset is limited and will not appear on your payment summary. The current limits are:

• — $11,875 for the 2023–24 income year
• — $10,625 for the 2021–22 and 2022–23 income years
• — $10,000 for 2020–21 and earlier income years

 

Tax Returns for Trustees of an SMSF

If you’re the trustee of a Self-Managed Super Fund (SMSF), you are required to lodge a tax return, even in retirement. Managing an SMSF comes with additional responsibilities, including tax reporting and compliance. Ensuring that you meet all your obligations is crucial to avoid penalties from the ATO.  

Tax-Free Super Pension Recipients

If you’re receiving a tax-free super pension, and it’s your only source of retirement income, you generally won’t be required to lodge a tax return. This applies to many retirees who receive their income entirely from a tax-free superannuation pension, allowing them to enjoy their retirement without the burden of annual tax filings.

Claiming Franking Credits

If you’ve received franking credits during the financial year but aren’t required to lodge a tax return, you can still claim a refund for these credits. This is especially relevant for retirees who might not have other income that requires a tax return. Fortunately, the process is straightforward and can be done in several ways to suit your preference:

1. Online: Simply log into your myGov account linked to the Australian Taxation Office (ATO) and follow the instructions to apply for a refund.

2. Phone: You can contact the ATO directly and request a refund over the phone. They can guide you through the process and ensure everything is completed correctly.

3. Mail: Alternatively, you can complete and send the Application for Refund of Franking Credits for Individuals form by post. This form can be downloaded from the ATO website or requested by phone.

Remember, claiming these credits helps ensure you’re not missing out on benefits you’re entitled to.  

When You Don’t Need to Lodge a Tax Return

For retirees or anyone not required to file a tax return, it’s important to notify the Australian Taxation Office (ATO) by submitting a non-lodgement advice form. This simple step lets the ATO know that you will not be filing a return for the financial year, preventing any unnecessary follow-ups or queries.  

You can notify the ATO in one of two ways:

1. Online Submission: You can easily complete and submit the non-lodgement advice form through your myGov account. This option is convenient and allows you to manage your tax affairs from the comfort of your home.

2. Through a Tax Agent: If you prefer, your tax agent can take care of this for you. They can complete and submit the form on your behalf, ensuring everything is handled correctly.

By submitting this form, you ensure that your tax records are up-to-date and reduce the likelihood of any unexpected correspondence from the ATO.  

If in doubt, seek expert advice…

Understanding whether or not you need to lodge a tax return in retirement can be complicated, especially with multiple income sources and tax offsets to consider. However, early planning and expert advice from a financial adviser can help you stay compliant and maximise your tax benefits. Seek guidance from a financial expert to ensure you meet all your tax requirements while making the most of available tax offsets.    

At Collective Wealth Advisers, we’re here to help you navigate the complexities of retirement tax planning, ensuring you remain compliant while making the most of your retirement income. Let us assist you in planning today, so you can focus on enjoying tomorrow.

Contact us today to learn how we can help you achieve your retirement goals.