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Cuffelinks Newsletter Edition 257

  •   8 June 2018

In the six years since Cuffelinks started, many heated debates have unfolded in our comments section, but none more so than the Labor proposal to deny franking credit refunds. It has opened tangential issues such as whether superannuation should be tax free after the age of 60, why large super funds are immune and who it adversely affects.

Three articles this week aim to provide more light than heat. Jon Kalkmanrefutes the claims that former Treasurer, Peter Costello, made super too generous in 2007, creating the problem where large SMSFs receive hefty refunds. Tom Garcia explains how a large industry fund manages franking and why the new policy will not affect its members, even those in the so-called 'direct investment options'. Finally, a reader shares a correspondence with Shadow Treasurer Chris Bowen which confirms his policy stance.

It's no surprise the latest Vanguard/Investment Trends SMSF Report shows the highest response to this question, 'What are the hardest aspects of running your SMSF?' is 'Keeping track of changes in rules and regulations', up from 21% to 27% of responses in the last year. 

Watch end of year maximum contributions and SMSF returns

With Federal Labor ahead 52-48 in the latest Newspoll, it's worth checking what financial planning steps to take in the next few weeks. Another Labor policy proposal is to lower non-concessional contributions to $75,000 a year. People wanting to maximise super contributions should consider not using the bring-forward rule this financial year. Rather, contribute $100,000 this year, then wait until the new financial year to use the bring-forward rule and put in another $300,000 under the current rules (and confirm with an adviser). These limits may never be as high again. 

The ATO has also issued two EOFY warnings. Trustees have until 2 July 2018 to lodge their 2017-2017 SMSF annual returns with an election for transition CGT relief, and that's also the date when SMSF annual returns must be lodged to avoid penalties.

Investment ideas

The lead stories in another newsletter this week illustrated the problems for publications focussed on selecting stocks. The first article was called, "Telstra and the banks are a buy if you're a long term investor", while the third article was, "Forget banks, AMP and Telstra". That's helpful.

We prefer to highlight investment themes, portfolio construction and asset allocation techniques, but in Australia, the decision on what to do with the banks dominates many portfolios. Rudi Filapek-Vandyck examines the outlook for the banks in the face of declining share prices. Listed Investment Companies (LICs) are another mainstay of our market, and Peter Rae describes the attributes of the LICs in his universe that trade at a discount. An asset that has fallen off the radar of many investors, gold, may be reaching the stage where it's worth an allocation, as Jordan Eliseo explores. On asset management, Michael Roberge shows why the markets should finally have turned in favour of active investing over passive after many years the other way.

With the NASDAQ and companies like Apple at all-time highs, two articles update technology trends. Michael Collins addresses the productivity and politics of robots and AI, while Marcus Tuck highlights Mark Meeker's amazing annual slide show on latest developments. Grab a coffee and a comfortable seat and flick through Mary's presentation, linked in Marcus's article.

This week's White Paper from Insight Investment analyses individual bond market segments, including emerging markets, asset-backed securities and high yield, with a currency review. See also the links below to hybrid and LIC summaries. 

Graham Hand, Managing Editor


Edition 257 | 8 Jun 2018 | Editorial | Newsletter



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