As we quickly race to 2019, I thought it was a great opportunity to look to the year ahead and make some predictions. To know what’s coming and be able to adapt and profit from it is crucial to not only a successful relationship with clients but also a profitable business.
Prediction No 1. New Government and a new attack on SMSFs
Unless something untoward happens, I fully expect Bill Shorten to be the next Prime Minister of the country. However expect the Senate to be populated by more cross benchers than ever as the voters issue a protest vote against both parties. So that means non-refundable imputation credits and negative gearing to be given a shakedown. And don’t be surprised to see LRBAs to be more tightly controlled or even cast aside. This is politics. The Labor Party’s desire is to make industry superannuation funds the premier savings vehicle in Australia (over and above residential property), giving the unions huge economic and business clout. Get in front of this with your clients and set up an action blueprint for all of these possibilities and more. In the March roadshow I will be giving my top five SMSF strategies, not only growth but protection strategies for excess credits plus a draft blueprint geared to client use.
Prediction No 2. A slowdown in the Australian Economy and even a Recession
Since the GFC, our economy has been protected thanks to Chinese investment in our resources, businesses and also property. I remember being outbid by a 19 year old Chinese student on a property in Sydney a few years ago. With the advent of capital controls in China, the bidding wars for many development properties, new apartments and general properties has evaporated. And with security concerns around China, state controlled enterprises are not getting a look in at key agricultural property, strategic businesses or infrastructure. What shielded Australia from a recession in 2009 while the world suffered is now impacting us with a slowdown in their infrastructure build while the US/China trade war impacts their businesses and in parallel, the Australian economy. Do we go into a recession in 2019, what’s your gut feel?
Prediction No 3. Renewables to get a Boost
It is a key plank of the Labor Party to boost the percentage of renewable energy in the economy. This is already happening in the solar industry with the cost of solar dropping rapidly and new battery technology getting better every day. With small powerplants now being built for industrial complexes to secure their power as well as significant Australian enterprises building their own plants, expect to see some tax concessions and strong investment opportunities in renewables.
Prediction No 4. SMSF Numbers to Increase
With a poor investment year in industry and retail super funds, history shows an increase in the number of SMSFs in general. If the ASX 200 drops to 4,000 expect to see a greater number of super fund members make the decision to do it themselves. But it is not all upside. There will be a number of less well structured SMSFs that will lose a sizable part of their capital and given the age of their fund members, expect more wind ups than we have seen since SMSFs were introduced in 1994.
Prediction No 5. Quality Education and CPD to shine through
FASEA is an independent body that creates its own delegated legislation. It is all powerful and we have seen with education standards the only way is up. The standards for a new SMSF adviser include 1,500 hours of mentoring and monitored log books. For existing advisers there will be an examination by 2024 but there should be no rush to do it, wait until a SMSF specialist exam comes around. For CPD there has been a big shake up as the Associations have had their monopolies taken away enabling CPD specialist providers to work with licensees, limited licensing accountants and authorised representatives to develop and complete a quality CPD plan that adds value, career enhancement and business plus ethics skills. For me it is very exciting and we have more than 200 hundred on our education platform. Finally an hours CPD is an hours CPD not points or three points per hour as some have been able to get away with.
Prediction No 6. Estate Planning the main Focus for Planners and SMSF Advisers
I am seeing real momentum in estate and more importantly bloodline planning, not only in SMSFs but in Testamentary Trusts, Family Trusts and Wills. It has come as a bit of a surprise but with up to $300Bn in SMSF wealth, and $1 Trillion in property outside of super to pass hands in the next 20 years, it is all about keeping it in the bloodline. Don’t believe it? Ask your wealthier clients whether it is important for them to ensure their family’s wealth stays within their bloodline. I have been doing a lot of work in this area including specialist Bloodline SMSF Trust Deeds, Bloodline Family Trust Deeds, Bloodline Testamentary Trusts and Bloodline Pensions. It is so exciting. These documents are currently being reviewed by our legal firm TGA Legal and will be released on Lightyear Docs in February for our CPD members.
Prediction No 7. SMSF Litigation Uptake
With the success of Cam & Bear, where a Trustee was able to claim investment losses from an auditor, expect the lawyers to be ready, willing and eager to increase their focus on SMSFs and any person who administers or advisers on them. Along with AFCA, where nil cost complaints can be taken by any client on really, a wide range of grounds, expect 2019 to be littered with litigation and increasing PI costs. Be careful.
Prediction No 8. Lots of Change
I am not sure about you but 2018 has to be one of the most tumultuous years that I have ever lived through. Whether it is the proposed new policies changes offered by the Labor Party, the implementation of nasty NALI laws, to political, global and economic turmoil, 2018 was a doozy. My gut feel is that things will be a lot, lot more dramatic in a lot of ways and it is important, that we stick close together and not try to weather change alone.
I have at least another five predictions which are a little more strategic and will let those out at the upcoming SMSF Strategy Roadshow commencing in March (more to come on this – we are busy planning something special!).
I look forward to seeing you there and more importantly, from all of the team at I Love SMSF, LightYear Docs and the SMSF Training Group, we wish you a happy and safe New Year.
– Here’s to a SUPER successfull 2019!
CEO – I Love SMSF