10 companies your SMSF needs to own in 2016

Clarke McEwan Accountants

2016 may well be a year for traders and those SMSF trustees willing to lock in short term profits. The old adage, "The bull goes up the stairs and the bear goes out the window" probably won't get much of a look in if the last week of December and the first week of 2016 trading is anything to go by. Markets finally had their Santa Claus rally jumping some 400 points on the ASX within days as the sun set on 2015 and then losing 200 points several days into the new year.

Had you bought the All Ordinaries (say using an ETF or a balanced portfolio of shares) around the 4950 and ridden the market to 5350 you'd be staring down the barrel of an 8 per cent return. That's probably better than you did all last year and it all happened in two weeks. The point I'm trying to make is that if you lock in your profits several times a year with a basic understanding of the market, you can improve your chances of investment success.

You will also need a basic understanding of value on both individual stocks and the market as a whole. The market appears expensive at 5,950 and cheap at 4,950 with fair value rated around the 5400 to 5600 region on the All ords. Remember, as Warren Buffett says Mr Market can be highly emotional and whilst the daily business news can fluctuate from optimism to pessimism on a flash release of a single piece of economic data, the stocks that we are trading are in fact real businesses with real customers, staff, products, services, income, expenses and profits. Some insights into their operations and thus valuations is essential if you plan on a successful retirement using your SMSF.

Of course, transaction costs need to be factored in. You may have brokerage, capital gains tax or advice fees to pay but never be afraid to make a profit and you'll never go bust! If you're lucky enough to be in pension mode, there is no capital gains tax no matter if you're in transition to retirement mode or account based pension mode. Your ability to trade successfully virtually cost fee is significantly greater.

So lets consider the macro environment. Interest rates are going up in the US and markets are cautious. Our dollar may be under pressure as a result of rising US rates and unemployment in the US remains low and business conditions strong. China is still growing but they are not booming and therefore our resources are may remain under pressure, and this too is a contributor to a lower dollar. Oil prices too remain subdued sitting at multi-year lows so the cost of business for many US companies remains cheap and the consumers will have more money in their pockets unless OPEC gets their act together and curbs supply.

Whilst global growth rates remain subdued and the outlook for the share market is forecast to run at parallels, the share market will be a stock pickers market in 2016. Banks still need to raise capital so it may be worth taking up potential further offers as interest rates are low and housing remains strong. Banks have an uncanny reputation to hang onto their profits despite short term regulatory headwinds. Health care has been a bellweather for growth but an impending government review on bulk billing has rained on the likes of Primary and Sonic but keep an eye on value in this sector. Ramsay (no. 1) remains a key holding for me and I've been topping up on the dips.

Consumer goods and services have been strong in our low interest rate environment and I'd urge some caution in the face of the Dick Smith failure but some common sense can be applied here. Interest rates are low, unemployment is low and house prices have been moving north (in most populous states) so consumers are active. Just watch for the switch in rates bias that can rain on this parade (possibly end of 2016) but there's little sign of that yet (read the free downloadable Westpac weekly economic report from their website). Every builder, architect and renovation related business I know is absolutely flat out and that should flow through to building and renovation-related businesses such as JB Hi Fi, Breville, Kresta, James Hardie and GWA. So too AP Eagers may work as a holding as more people upgrade the family sled and motor vehicle sales touch records. A word of caution though, these stocks can be fickle, must be watched very closely and are not in my top 10 despite strong results.

I'll be watching less of the old stalwarts (although I like the first three) such as CBA (no. 2), NAB (no. 3), Telstra (no. 4), Woolworths and Wesfarmers and more of other large cap stocks in the form of Seek (no. 5), Crown (no. 6) and REA Group (no. 7). Woolworths is a sell in my books. Never lose sight of dividends and the banks again remain strong contenders for income and CBA is my favourite and Macquarie (no. 8) appears a reasonable prospect to me with the possibility of greater corporate activity and their expansion of recurring revenue streams, as does Challenger (No. 9). Just be cautious of dividend traps such as BHP (no. 10) although it has looks like good value at the moment and we'll be watching their results very closely this year as it remains in portfolios coupled with Woodside as the only resources contenders for our very conservative clients.

All in all, 2016 may be a subdued year overall but like always opportunity will abound and your results will simply be a function of how you capitalise on the potentially fleeting moment of portfolio profit. Some logical application of basic economics, consumer behaviour and market and company valuations can have a significant impact on your superannuation balance. Your retirement depends upon it.

Could your business survive without you?

By Clarke McEwan • September 17, 2025
Would your business still thrive, or would it suffer a catastrophic failure if you suddenly stepped away? It’s tough to remove yourself from the day-to-day operations when you’re passionate and busy. However sudden accidents, illnesses, or family emergencies can – and will – happen and you need to be able to step back knowing your systems are robust enough to cope. Build in resilience For your business to work for you, you need to make yourself replaceable. Large corporations have plans in place to mitigate what’s known as ‘Key Person Risk’. But when you run a small entrepreneurial venture, who is the backup?  The more you can train and empower your team to perform the business’s essential daily functions without micromanagement, the closer you'll be able to enjoy a lifestyle business. Establish repeatable and scalable support infrastructure to run the daily operations and create a great team that you can lean on. Your staff need a common purpose – knowing why what they’re doing matters – as well as clear expectations around their roles. By creating a suitable work environment, where employees both individually and as a team are more efficient and likely to enjoy what they do, you’ll breathe easier knowing they have your back (and your business) in an emergency. Finally, it’s important to know what the business looks like without you. An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it’s a plan that moves a business toward long-term goals and allows a smooth transition to a new phase. That may involve re-imagining business direction or leadership, keeping financially sustainable, or pivoting for challenges. A fully formed exit strategy takes all business stakeholders, finances and operations into account and details all actions necessary to sell or close. Strong plans recognise the true value of a business and provide a foundation for future goals and new directions. Top Tips: 1. No one is irreplaceable – Challenge yourself to step away for a week. Which systems fall over? Which procedures get left hanging? Which duties get ignored? Go cold turkey as a test case for the time you may have to leave your business in the hands of others. 2. Embrace innovation – Get systems that are simple, streamlined, effective and can be used by multiple key team members. Make sure anyone can log in and see exactly what’s needed for what reason at any time. 3.Recognise the value you’re creating - A business that doesn’t rely on its owner is worth a lot more when the time comes to sell or pass the reins to someone else. Talk to our team about structuring your business to make it more reliable.

Keeping your tax and expenses in check when you are self-employed

By Clarke McEwan • September 16, 2025
Working for yourself or running your own business? Setup robust systems for expenses & tax requirements so you can focus on your important tasks. We can help take the headaches out of your business accounting. #freelancelife #taxtalk #smallbusinesstips #contractors #medicalcontractor #businesscontractors #ABN

A win for those carrying student debt

By Clarke McEwan • September 9, 2025
20% reduction in student debt The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans: · HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP) · VET Student loans · Australian Apprenticeship Support Loans · Student Start-up Loans · Student Financial Supplement Scheme. The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied. If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you. The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility. Changes to repayments The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments. The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year. Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000. Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO. For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

Creating a more dynamic and resilient economy

By Clarke McEwan • September 9, 2025
The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations. The PC has now released its interim report which presents some draft recommendations that are focused on two key areas: · Corporate tax reform to spur business investment · Where efficiencies could be made in the regulatory space (ie, cutting down on red tape) The interim report makes some interesting observations and key features of the draft recommendations are summarised below. Corporate tax reform The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes. The first stage of this process would involve two linked components: · Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate. · New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion. Cutting down on red tape The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps. The proposed fixes include: · The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism. · Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered. · Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation. These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia. The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.

Non-compete clauses: the next stage

By Clarke McEwan • September 9, 2025
Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers. Treasury has since issued a consultation paper, seeking feedback in the following key areas: · How the proposed ban on non-compete clauses should be implemented; · Whether additional reforms are required to the use of post-employment restraints, including for high-income employees; · Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and · Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act. Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment. If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.

Superannuation guarantee: due dates and considerations for employees and employers

By Clarke McEwan • September 9, 2025
On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday. To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH). The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers. Employers To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date. Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions. If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO link below: The super guarantee charge | Australian Taxation Office Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this. Employees It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips. Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO. There is some helpful discussion on this process at the following link .
More Posts