MONEY | Who made their mark in the financial world during 2020?

MONEY | Who made their mark in the financial world during 2020?

Today let's have some fun and recognise those who have made unique contributions to the world of money in 2020.

Rio not so grande

The standout contender for the Naughtiest Kid on the Block award is Rio Tinto - the world's biggest iron ore miner. Despite much publicised opposition from the Aboriginal traditional owners, Rio went ahead with the destruction of the Juukan Gorge rock shelters, which showed evidence of continuous human habitation dating back 46,000 years. They were among the oldest historic sites in Australia.

The three most senior executives lost over $6 million in bonuses but not their jobs. Rio's website proudly proclaims: "We work hard to leave a lasting, positive legacy everywhere we work". They sure got the "lasting legacy" bit right.

Invest now - win big

The Golden Lion Award for the Australian Share of the Year goes to Afterpay. Their shares were nudging $30 at the start of the year but at the date of writing had almost quadrupled to $114. I must confess I have never owned the shares - they have always seemed overpriced to me. Now the price seems to be driven by fear of missing out, but how would you know.

Asleep at the wheel

The Leonardo Da Vinci award for procrastination goes to the Australian federal government. In December 2016, Treasury released a discussion paper stating it was aware that retirees were living too frugally, as they did not know how long their money would last. The message was that Treasury wanted the industry to develop a suitable product to solve the problem. The May 2018 budget went a step further by introducing a retirement income covenant requiring trustees of super funds to offer Comprehensive Income Products for Retirement, which would provide lifetime income streams. Two years later, CIPRS are still in the government's too hard basket.

Coming home to roost

Last year, I gave Mayfair Platinum the Nant Whiskey Award for the record number of full-page ads offering breathtaking returns. My suspicions had been raised by the advertisements themselves, then on December 6, online newsletter Crikey published an article by Adam Schwab, who reckons Platinum "raises more red flags than a North Korean military parade". I wrote at the time: "You pays your money and you takes your chances". It was prophetic - it all went belly-up on April 7, 2020, when ASIC launched Federal Court proceedings against Mayfair, alleging they were engaged in misleading or deceptive advertising.

Barking up the right tree

And, finally, for the fifth year running the Red Kelpie Award (for long-term, loyal and meritorious conduct) goes to ... the Australian Stock Market. The kelpie sure gave us an exciting ride. The index stood at 6946 on January 1, then plunged to 4854 on March 20 when COVID became the big news. However, the good dog quickened its stride and quickly got back on track. The index has been steadily rising ever since and, at date of writing, was 6947. Despite zero capital growth, the index did keep paying around 4 per cent per annum.

Yes, you would have done much better with Afterpay, but that involves picking winners. The great thing about the index is there are no decisions to make - you invest your money and leave it alone.

Noel answers your money questions

Question

I am 50 and have two serviced apartments as investment properties.

The properties are worth a total of $900,000; the mortgage on each is $180,000; and they both have long-term lease agreements, with guaranteed rental income.

Current gross yield, based on purchase price, is around 6 per cent per annum, and they are almost positively geared.

I also have $500,000 in a self-managed super fund, invested in managed funds and shares.

There is no property held in the SMSF.

Can I sell or transfer one of the properties at market rate into my SMSF? I understand this will incur around 7 per cent in transaction costs and CGT, if applicable.

Answer

Section 66 of the SISA prohibits a trustee from intentionally acquiring certain assets from a related party.

There are exemptions such as listed securities, and business real property.

It would seem that neither of these applies in this instance.

You would almost certainly have capital gains tax to pay if you did transfer them (which you can't) and in any event, I think they're better held in your own name.

Question

We are having some difficulty in understanding your explanation on the cashing out rules on the death of a spouse where both have $1.6m each in pension accounts together with substantial accumulation accounts.

What has to be "cashed out" and must the amount be in cash, which would require our fund to sell shares or property.

Alternatively, can it be a paper transfer of shares and or property to the surviving spouse's non-superannuation personal account?

Answer

Once a member of a superannuation fund dies, the balance must be paid out within a certain time.

The most that can be retained by a spouse in superannuation is $1.6 million.

Any money in excess of that must be paid to them as a non-taxable lump sum and invested by them outside the superannuation system.

If a spouse had $1.6 million in superannuation and was in pension mode, they could move that existing $1.6 million into accumulation mode to make space for the $1.6 million left by the deceased to go into their pension account.

As you have a self-managed superannuation fund, the adjustments for the $1.6 million can be managed within the fund by journal entry.

Any sums excess of that can be paid by cash or in specie.

Question  

We are a married couple. I am 74 and work part time.

My wife is 64 and a self-supporting retiree who does not work.

For the purpose of age pension calculation am I a single?

Answer

For Centrelink purposes the calculations are done as if you were a member of a couple, and then entitled to half the pension a couple would receive if they had your assets and income. Keep in mind that your combined assets and income will be taken into account when your eligibility for a pension is being assessed.

  • Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. noel@noelwhittaker.com.au