26 THE AUSTRALIAN, TUESDAY, SEPTEMBER 29, 2015theaustralian.com.au/wealth WEALTH

AUSE01Z01MA - V1

If your Self-Managed Superannu-ation Fund receives superannu-ation contributions from non-related employers, your SMSFneeds to receive these contribu-tions in the required electronicformat. If you aren’t sure if yourSMSF is “SuperStream” com-pliant, you need to read on.

Nathan Burgess, ATO directorSMSF Income Tax & RegulatoryRisks, recently told me that of the500,000 SMSFs in Australia,some 300,000 need to be Super-Stream compliant. Mr Burgesssaid about 5 per cent of SMSFshave not taken the correct stepsnecessary to comply with theSuperStream requirements.

Under the new SuperStreamsystem, a non-related employer

must send superannuation contri-butions to an SMSF electronic-ally, using an electronic serviceaddress (ESA). This is an internetaddress created to enable Super-Stream messages to be receivedsecurely and it is different to anemail address.

However, in order for this tohappen, an SMSF first needs to beregistered with a messaging pro-vider to obtain an ESA. An SMSFcannot simply use an ESA that be-longs to another SMSF unless theSMSF is also registered with thissame messaging provider.

Once an SMSF is registeredwith a messaging provider, themessaging provider will link theSMSF to an ESA. Until this is donethe employer cannot start sendingSuperStream contributions elec-tronically to the SMSF via thisESA. Mr Burgess stressed that theESA needs to be “active”. “If it isnot active, the superannuationcontributions submitted by theemployer will be rejected. The em-ployer will also receive an errormessage. It is important thatSMSFs check with the service pro-vider that provided the ESA to en-

sure their ESA is active and islinked to their SMSF,” said Bur-gess.

All SMSFs, even those that area related party to an employer canbenefit from SuperStream. Onhighlighting the advantages of Su-perStream, Mr Burgess said, “TheSuperStream system ensures thatemployer contributions are paidin a consistent, timely and ef-ficient matter to members’ ac-counts. It provides a reliable flowof payments and information oncontributions which SMSFs canuse for their accounting and taxobligations. It also results in fewerdata and payment errors due tothe better integration of employ-ers’ payroll systems, as it allowsemployers to use a single distri-bution channel when dealing withmultiple SMSFs.”

SMSFs that receive contribu-tions from non-related employersshould be ready for SuperStreamnow. Employers with more than20 employees must be able to sendSuperStream contributions to allsuper funds, including SMSFs, byOctober 31 2015. Small employershave until June 30 2016 to

implement the SuperStream sys-tem though many of them havealready commenced sendingSuperStream contributions.

Messaging providers are nowoffering free or low cost access toan ESA meaning all SMSFs canobtain the benefit of electronicprocessing. Details of messagingproviders are available on the taxoffice’s website. After registeringyour SMSF with a messaging pro-vider they will provide an ESA, re-ceive employer contributionmessages sent to your SMSF andsend employer contributionsmessages to SMSFs.

SMSF trustees must also en-sure that their employers receivethe SMSF’s Australian BusinessNumber, bank account detailsand ESA. If employers do not re-ceive this mandatory information,they may direct employees’ super-annuation contributions to theirdefault superannuation fund in-stead of to the employees’ SMSFs.

www.monicarule.com.au

Monica Rule is an SMSF specialist and author.

Why SMSFs should get their SuperStream right MONICA RULE

Positioned to notch up its third consecutive year of decline, the US dollar price of gold is hovering more than 40 per cent below its 2011 high. The contraction has had a cataclysmic impact on the shares of goldmining companies, with popular indices such as the “HUI” more than 80 per cent lighter than their bull market peak. So how has the industry responded?

Despite the price contractions, annual world goldmine output has continued to rise. After posting a sixth consecutive increase during 2014, output remains 20 per cent higher than pre-financial crisis levels when the prevailing gold price was $US900 an ounce. Hence, if the cure to gold’s current bear market is a supply response, the mining collective faces further work ahead. However, with equity prices in the sector already having suffered such massive declines, could the coming listing of Soon Mining provide a contrarian opportunity?

The minerals exploration company is principally focused on Ghana, Africa’s second-largest gold-producing nation. Its principal asset is the Kwahu Gold Project, which covers 83sq km, incorporating a mining licence and certified mineral resources. The mining licence has a tenure extending until 2027, while the resource consists of an alluvial gold deposit in the order of 150,000 ounces, classified as indicated.

Proceeds from Soon Mining’s float are scheduled to facilitate development of a small-scale mining and processing operation incorporating the existing resource. The planned 10-year operation has potential to generate in the order of 10,000 ounces per annum, with more scalable exploration targets within the licence likely to attract surplus cashflow.

Principal risks surround thesmall-scale nature of Soon Mining’s development plan and present state of gold equities. Valuations in the industry are depressed and economics associated with development of the Kwahu alluvial deposit is uncertain.

The long-dated nature of thecompany’s mining concession and presence of mineralisation are attractive qualities. However, execution risks associated with small-scale mining developments may challenge interest for the initial public offer.

Tim Morris is an analyst at wise-owl.com.

New goldventure faces up to risks

TIM MORRIS

FLOATWATCH

Soon Mining ASX CODE: SMGSHARES ON OFFER: 25 millionLISTING PRICE: 20cMARKET CAPITALISATION: $30 millionLISTING DATE: October 16

Salary sacrifice for retirement

How you can save for retirementtax effectively without it impact-ing on your current income?

If you’re a wage and salaryearner then the answer is to con-sider using salary sacrifice.

This involves you and youremployer agreeing that some ofyour remuneration will be sent toyour super fund by the employerand the remainder will be paid toyou as salary.

Let’s look at an example. Sup-pose this financial year you’ll bepaid $100,000 in salary. Over thecourse of the year you would pay$26,947 in income tax and Medi-care Levy. Your after tax incomeis $73,053.

There are some important as-sumptions in these numbers —you’re not eligible for any tax off-sets such as the Family Tax orChildcare Benefits and you alsohave private health insurancewhich means you don’t need topay the Medicare levy surcharge.Also, you don’t have to pay anyhigher education or trade sup-port loan repayments. And final-ly you don’t earn any otherincome such as interest frombank deposits.

Let’s assume that you salarysacrifice $10,000 into superwhich means your salary drops to$90,000. After paying income tax

and the Medicare levy you’ll re-ceive $66,953 in income which is$6100 lower than if you took allyour remuneration as salary.

Salary-sacrifice contributionsare deemed to be employer supercontributions and are taxed at15 per cent as opposed to yourmarginal rate which means thesesuper contributions will have$1500 of tax deducted. Total taxpaid is $24,547, which is $2400lower than previously.

Some people ask if you canstructure your salary-sacrificecontributions so that your after-tax income remains at the pre-salary sacrifice level.

The correct answer for some-one on $100,000 is that, everydollar of salary sacrifice supercontributions will give them alower overall tax outcome, andalso lower-after tax income.

Take our $10,000 salary sacri-fice example above. Under thatscenario we will receive 8 per centless income ($6100 as alreadymentioned) but our total tax billhas fallen by 9 per cent.

These might seem like a smalldifference but if you’re strugglingto work out how to save for retire-ment when money is tight thenyou have to use the variousstrands of the tax system to youradvantage.

Because of our progressivepersonal tax scales different re-sults arise for other income levels.

Now before rushing off toenter into a salary sacrifice ar-rangement, there are some pointsthat must also be considered.

First, does your employerallow salary-sacrifice contribu-tions? If yes, will they pay theircompulsory employer contribu-

tions on your total remunerationor your revised salary amount?What remuneration will be usedwhen working out your holidaypay loadings, overtime and otherallowances? Do you have a bind-ing agreement with your em-ployer as to when these salary-sacrifice contributions will bemade?

Second, the Family Tax Ben-efit and Childcare Rebate andBenefit — these are subject to anincome test but are effectively taxcuts. It may be that after you re-ceive all these benefits you actu-ally pay an average tax rate onyour salary of less than 15 percent, that is, the tax rate on em-ployer super contributions. If youreceive any of these benefits youshould work out your actual nettax position first before decidingif salary-sacrifice contributionsactually work for you.

Third, don’t forget about theconcessional contribution caps. Ifyou were aged at least 49 on June30, 2015, then the maximum con-cessional contributions that canbe made this financial year is$35,000. For everyone else theconcessional contribution capthis financial year is $30,000. Or-dinarily you can make conces-sional contributions above thisthreshold but those excess con-tributions will be taxed at yourmarginal tax rate and possiblyother penalties. And finally, youcan only put in place a salary-sac-rifice agreement for income thatyou will earn, not income thatyou have already earned.

Tony Negline is author of The Essential SMSF Guide 2015-16 published by Thomson Reuters.

TONY NEGLINE

What’s a good way forward for aresource fund when commodityprices are looking bleak all over?

David Whitten, the veteranlocal manager who in 2012 found-ed what’s now the HendersonGlobal Natural Resources Fund,has a simple answer: in his worldthe phrase “natural resources”includes agriculture, and his fundis invested 37 or 38 per cent in agri-business, 28 per cent in energy and33 per cent in mining.

Which means that while thefund is down 7.9 per cent in the last12 months, the annual averagereturn since inception is a muchmore respectable 8.0 per centcompared with the relevantbenchmark index, the S&P GlobalNatural Resources AccumulationIndex, which has averaged 5.7 percent over the same period. Andmuch better, of course, thanalmost any conventional resour-ces fund.

“It’s worth noting that we’renot hugging that index; indeed 75per cent of our investments departfrom that benchmark,’’ he says.

Whitten said the HendersonGlobal Natural Resource Fund,which was called the 90 West fundwhen he founded it, was $36 mil-lion or $37m.

“That commenced a bit overthree years ago and is our flagship

retail product” out of a total of$280m under management, hesaid, which includes one largemandate from a big unnamedmanager, and a SICAV, similar toa UCITS structure, run out ofLuxembourg on behalf of British-based Henderson Global.

A SICAV, for the pedants, is a“societe d’investissement a capitalvariable” or a variable capital in-vestment company, usually classi-fied as an open-ended collectiveinvestment scheme.

“It takes a while to get going but

we’re on platforms and have beenrated by various groups,” saysWhitten.

On June 1 this year Hendersonfully took over the 90 West fundthat he started, having previouslybeen the major shareholder in thebusiness, Whitten said.

“That’s working out wonder-fully and we’ll have full integrationby the end of this year”.

He said that in July he addedanother team member, Kiwi re-sources analyst Tim Gerrard.

“He’s in Toronto today talking

agriculture … he’s broadeningbeyond mining.’’

Whitten says that not only isthe fund a big holder of global agri-business companies but in themining and energy markets “wearen’t just investing in thetraditional upstream businessesbut going into the mid market intransport and distribution”.

A bit like the merchants whosold shovels to the gold prospec-tors, he sees nothing bizarre aboutbuying into pipelines and otherbusiness whose revenue streams

are less dependent than upstreamproducers on commodity prices.

“The low gas price has beenfantastic in North America for thepipeline companies.’’

He’s not scared of lowercommodity prices either, aboutwhich he remains very cautious,noting that “that’s what we need,for the higher-cost producers ofcommodities to be in a bit of strife,for that reason.’’

He says there’s a big negativecoming shortly in the US, in thatoil companies are allowed to value

their reserves at last year’s prices,“and I can guarantee that oil’s notnow worth $U90 a barrel.’’

Or put another way, next year’sreports from US shale extractorswill have to be a lot more honestabout the value of their reserves.

That said, he adds thatimprovements in drilling techno-logy mean that some companieswill be making more money withthe oil price at current levels thanthey were when it was $US90.

But where he gets seriouslyanimated is in discussing themassive potential of the agri-business sector, most particularlythat recent scientific discoveriesabout genome separation andgene splicing should revolutionisecrop yields and reduce weedspraying.

“We’re not talking GM here:we’re talking major advances incrop production and at the sametime, northern hemisphere agri-business has discovered the hugebenefits it can gain from the differ-ent seasons in the southern hemi-sphere.’’

He is one of many who don’tsee much immediate upside in

Australian agricultural organis-ations because of their lack of scaleand lack of technology, althoughhis fund has positions in Grain-corp and its likely US-basedbidder, Archer Daniels Midland,on the basis that he very muchlikes the quality of the ADM man-agement.

And he says there’s been arevolution in US eating habits thatsimply hasn’t been recognisedoutside that country.

“It used to be they provideddoughnuts for morning tea, andnow it’s carrot sticks.’’

Maybe that doesn’t sound thedeath knell for fast food, but it’s astrong trend, he says.

Aside from his enthusiasm forag stocks, there’s another hugepositive in including such stocks ina natural resources fund: it redu-ces volatility.

“Since inception, the fund’svolatility has been 10.3 per cent,just below its benchmark index’svolatility of 10.6 per cent’.

“By comparison, a traditionalmining investment fund wouldhave almost twice as much vola-tility at around 20 per cent.’’

Henderson has natural flair for returnsANDREW MAIN

DAN HIMBRECHTS

Local CEO Rob Adams and David Whitten of Henderson Global Investors. The fund’s average return is 8pc

Returns since inception

Source: Henderson Global Investors, Bloomberg

%

0

-10

-20

-30

10

20

30

40

50

1514132012

Absolute and relative to S&P Global Natural Resources Index (in $A)

As at August 31, 2015

SPGNRUT ($A) – TOTAL SINCE INCEPTIONHENDERSON GLOBAL NATURAL RESOURCES – TOTAL SINCE INCEPTIONS&P/ASX 200 RESOURCES INDEX (ACCUM)

FUND+27.7%

BENCHMARK+19.1%

ASX 200 RES-16.6%

VALUE ADD+8.6%

Edited by James Kirby

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