Key Discussion Points

March 2019

Key Discussion Points – March 2019 2019-04-02T13:05:28+11:00


Alternatives to Franked Income Seminar

30th April 2019, 6.00pm – 8.30pm, Jam Factory

Hope you received our invite to attend the seminar on Alternatives to Franked Income last week, and have already registered for it. For those of you with clients in Melbourne we are hoping to get as many clients and potential clients along to our event at the Jam Factory Gold Class cinemas on Tuesday 30th April. The last event we held at this venue was well received and we think the line-up of external fund managers we have arranged (like the last event) will be well positioned to articulate the increasing alternatives to franked income available. We have senior fund managers from each of the AMP, Newmark Capital, Ardea and Latrobe Financial Group presenting on topics from fixed income, infrastructure, mortgage funds and direct property. We would love to pack the place out, so please be sure to flag to clients and potential clients early to guarantee a seat.




R&D tax incentive – Software development

  • AusIndustry recently released an updated reference document and guide to common errors to assist companies determine R&D tax incentive eligibility for software development activities.
  • Although this is a positive step in the right direction we believe more clarity is still required as the documents merely consolidated and reinforced examples that have been published in previous alerts.
  • We understand from industry that R&D software claims still appear to be a focus of the ATO.

Annual R&D registrations for tax year ended 30 June 2018 – Reminder

  • Applications for the June 2018 tax year are due for lodgement with AusIndustry by 30 April 2019.
  • It is important to also note this is a ‘use it or lose it’ deadline with late lodgements rarely accepted.
  • Please contact us immediately if you have any potential clients you think may be eligible and require support, alternatively if you have any questions yourself, we would be pleased to assist you. 

For any enquiries:




An Introduction to Prime Capital


Prime Capital is the corporate advisory arm of Prime Financial Group. Formed in 2017 out of a growing demand from clients that were seeking a client centred, tailored advisory offering, Prime Capital now has coverage in Sydney, Melbourne and Brisbane.

Prime Capital brings together a team of advisors, with tier 1 experience, coming from some of Australia’s best boutique advisory firms and the Big 4. Prime Capital has a deep understanding of the Australian mid-market space and our partners are highly experienced in assisting firms capitalise investments or take that next step in their corporate development and growth.

Services Offered & Approach

Prime Capital provides a full suite of corporate advisory/finance and investment banking services including corporate development, mergers & acquisitions (M&A) transactions, capital raisings and corporate advisory. Prime Capital covers all sectors and size of transactions – including early stage technology through to large multinational enterprise transactions.Prime Capital prides itself on being uniquely able to provide services ranging from long-term corporate development roles to bespoke one off transactions. There is no ‘one-size fits all’ approach. Every engagement is unique, with Prime Capital tailoring its service to each individual client’s needs.

  • Mergers & Acquisitions: Prime Capital’s advisers are extremely experienced Sell-side and Buy-side transactional advisers, having acted on deals across all sectors both for private and public companies.
  • Corporate Development: Prime Capital’s corporate development clients are typically long term engagements where Prime Capital advisers work with senior executives of growing private and public companies, providing advice on acquisitions, capital structure and strategic decisions of the business. Often Prime Capital becomes a key part of the company’s management team.
  • Capital Raisings: Prime Capital raises capital for businesses ranging from early stage through to mature businesses seeking to grow.
  • Corporate Advisory: Given the experience of Prime Capital’s advisers, often the team is called upon to provide bespoke advice on a range of corporate matters, typically with a capital event or transaction in mind.

For any enquiries:





Ten Smart SMSF Strategies

Written by Karen Dezdjek

1. Consider commencement of an Account Based Pension as soon as client is eligible
Aids in maximizing the amount held in pension phase from a Transfer Balance Cap perspective as income generated and growth of the assets do not count towards the Transfer Balance Cap.

2. Take any excess over the minimum pension as a lump sum
For members with an accumulation and a pension account take excess pension withdrawals from the accumulation account to create a more favorable ECPI for the following year. For members in full pension mode consider taking excess pension drawings as a commutation to create additional room in the Transfer Balance Cap of the member.

3. Run Multiple Pensions
Allows a member to crystalise taxable and tax-free components. When excess pension drawings are taken allocate to the pension with the highest taxable component. Maintaining balances with the highest tax-free components will be of benefit when a death benefit payment is made to a non dependant.

4. Utilise the Recontribution Strategy
Where eligible, this allows a member who has a pension balance with a high taxable component to withdraw a lump sum and recontribute this amount as a non-concessional contribution and commence a new pension. Alternatively, if the member has a balance in excess of $1.6 million withdraw the excess and re contribute for the spouse if they have a lower balance (assuming they are eligible to receive contributions).

5. Pay Life Insurance from a Pension account with a nominated reversionary
When proceeds are received from a life insurance payout and the pension has a reversionary nominated the proceeds will form part of the original pension account. The balance that is assessed for Transfer Balance Cap purposes will be the balance at the date of death. Therefore, any amount received after this date no matter how large will not be assessed from a Transfer Balance Cap perspective and will all be maintained in a tax-free environment.

6. Implement Spousal Contribution Splitting
For couples with inequitable balances an eligible a member can receive 85% of their spouse’s prior year concessional contributions. Advantageous for members who wish to equalise their members balances who may not meet a condition of release for a recontribution strategy.

7. Register the fund for GST
Voluntary registration for GST means that a fund can claim back 75% of the GST on ongoing advice, administration and brokerage fees. This is suitable for a fund that does not hold commercial property and has significant eligible expenses that incur GST.

8. Consider segregating Assets
A fund can no longer segregate for tax purposes if a member has more than $1.6 million. However, a fund may still segregate from an investment perspective which will enable high growth assets to be allocated to the pension account. This is beneficial from a Transfer Balance Cap perspective and assist in ensuring the pension will last the members lifetime.

9. Utilise the Downsizer Contribution
Members who sell their family home are now eligible to contribute up to $300,000 each. Beneficial for members who are wanting to top up their balance in a tax-exempt environment and haven’t previously been able to contribute as they did not meet the work test.

10. Consider the benefits of Reversionary Pension Nominations
Assess whether members in pension mode would benefit from a reversionary nomination. The amount attributed to the Transfer Balance Cap will be assessed on the date of death and the fund has twelve months use of the deceased’s Transfer Balance Cap. This enables the fund to realise any potential capital gains in a higher tax-free environment. In addition, any growth in a deceased member balance in the following twelve months will not count towards the reversionary pension recipients own Transfer Balance Cap.

To discuss any of these strategies in further detail please contact Karen Dezdjek:




Case Study

Written by Livio Caiolfa

I recently met with some of my long-standing clients, John and Ailene, who had some terrific news to share. They were expecting their first child together. The birth of a child is an exciting time and it is often referred to the single one event that changes your life like no other. Having now gone through it three times, I find it hard to disagree with that sentiment!
As with most life changing events, John and Ailene wanted to know how this may impact the plan we had in place.

John is hardworking and heavily involved in the family business. The bulk of his net worth is tied up in the business and control of these assets is shared with other family members. Ownership is via different entities and it leaves John with very little assets in his own name. Ailene is hoping to stay at home as the primary carer as they embark on this new phase of their lives together.
John’s income and employment are very secure, and he has a great relationship with his family. He has always felt that if anything happened to him, that the family business that he has helped to grow will continue to look after him and his own growing family.

But I raised the question, well what about when you are gone John?

The reply was quick and without hesitation. “that changes nothing”. There is an “assumed responsibility” that John’s family would continue to look after Ailene and their children if John was to pass away. Whilst there is an assumption there is no responsibility nor obligation for John’s family to provide for Ailene, so I identified this as a risk and moved to address this.

I completed a needs analysis to understand how much Ailene would need to care for herself and their unborn child if John was no longer with us. I calculated a lump sum that would be required to cover off this amount and moved to secure a policy over John’s life so that in the event John passed, Ailene would have the independence to get on with her life and not be reliant on John’s family to look after her.

Important to note that it is also expected that overtime control of the business assets will be transferred to John, and it is at this point the insurance policy will need to be reviewed. If control of the assets rest with John, then how these are distributed on his death can be addressed by the will and providing they are enough in value to provide for his family, the insurance policy may no longer be required. For this reason, the policy we put in force had stepped premiums.

The Result
Ailene can rest assured that she will be financially independent to make her own decisions and not be reliant on John’s family to support her if he was to pass.


Client Service & Experience

We would like to introduce you to a few more team members that have recently joined the Prime family:

Navneet Sandhu – Vic Client Services
Navneet has been in the Financial Services industry for the past 8 years, having worked for larger institutions such as Cbus Super and ANZ to name a few. Navneet along with her Client Services and Paraplanning experience brings a wealth of knowledge to the team.



Arjun Shrestha – Vic Client Services
Having completed a Bachelor Business in Accounting, Arjun initially started with us as an intern with our SMSF team and has now accepted a position in our Client Services team. Arjun is very passionate about learning more about Wealth Management. His career goal is to build expertise in the Financial and retirement planning industry where he would like to assist clients to achieve a comfortable retirement.




Qualitas Senior Housing Fund

Written by Jonathan Bayes

Through our growing relationship with alternative property financier Qualitas, and our investment across the client base in the list Qualitas Real Income fund, Prime and our clients are now likely to participate in one of Qualitas’ wholesale fund offerings, the Qualitas Senior Housing Fund on behalf of several sophisticated investors.

The fund is a 7-year term and plans to invest in several established retirement villages. Qualitas have partnered with a long-serving and well-regarded industry executive and see the opportunity for a 15% internal rate of return over the period, which we think is excellent given the modest gearing to be applied to the trust.

We are endeavouring to do more of these things to appeal to the sophisticated investor, and would sincerely encourage you to get in touch if you have investors in your network who would benefit from being shown these interesting opportunities.

SMA Data Feeds into Class

As you might recall a few months ago, we spoke about a collaboration with Macquarie & Class and establishing a pilot group to work on the data feeds.

Well great news! The Pilot group have now finalized this and are currently in ‘testing phase’.

At this stage we are not aware of the release date, but will you keep you updated as we hear more.

Monthly Commentary

Prime SMA

Global equity markets continued their charge higher in February with the MSCI World Index rallying another 5.5%

Global risk sentiment improved on the back of increased optimism a trade deal between the US and China would emerge as the deadline for additional tariffs was extended.

The US equity market added 3% driven by trade talks and a solid Q4 corporate reporting season. More than half of companies that reported exceeded expectations with Apple and Netflix both extending their previous month’s gains.

The USD was stronger against a basket of currencies with the AUD buying 71c at the end of February.

US bond yields snapped a 3 month losing streak rising as risk appetite picked up. US 10 year Treasury yields added 9bps to yield 2.72%

Asian equity markets tracked higher and China soared 13.8% following a possible resolution to the trade dispute. Interestingly Morgan Stanley Capital International (MSCI) announced it will quadruple its weighting of Chinese mainland shares in its global benchmarks which could add $80bn of foreign inflows to the Chinese economy.

The Australian equity market was stronger with the ASX200 Accumulation Index rising 5.98%.

Oil continues to climb higher with Brent rising 8.5% to $66/barrel and WTI to $57/barrel (+6%.)

Australian reporting season was a shade weak with one quarter of companies exceeding expectations and one third disappointing.

Rising cost pressures and stagnant wage growth continue to impact consumer spending which ultimately impacted performance.

Contributors to performance in January were BWX (BWX) and IOOF (IFL) +54% and +30%. BWX responded to recent downgrades reporting $7m in 1H EBITDA but more importantly looks more likely to achieve its revised $28m full year earnings number. On <14x FY20 earnings numbers we continue to think the market has oversold BWX. IFL which had also been heavily sold off following APRAs move to disqualify five executives outperformed the market posting 6% growth in net profit and strong growth in its funds under management and advice business.

The worst performer was Nufarm (NUF) which fell 16%. There was no exceptionally weak day for NUF, rather a steady decline over the course of the month. NUF has been sold-off due to a prolonged Australian drought and concerns around the use of Glyphosate more commonly known as Roundup. We think both these concerns are overplayed and believe there is a substantial opportunity in its development of Omega 3.

We were active in February exiting our position in MFG and trimming our holdings in AMC, APT, HSO and QUB in the Growth SMA. The Diversified Income SMA likewise booked profits in MFG and exited the holding while the Defensive and International SMAs remained unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

Risk Profile Portfolio Performance Figures as at 28 February 2019

* Annualised return(s). Portfolio Inception date 3/7/2012

Prime SMA – Model Portfolio Performance Figures as at 28 February 2019





Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (‘Prime’) . Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.