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6 YOUR MONEY thewest.com.au Monday, November 3, 2014 If you are feeling a bit pessimistic about how well your investments are doing, you are not alone. The latest investor confidence index survey by global advisory company State Street showed European investors see particu- larly grey clouds on the horizon. “Investors in Europe showed lower risk appetite, with the European ICI falling 24.3 points to 115.5,” State Street reported. “In North America, by con- trast, the ICI rose 5.9 points to 108.5. The Asian ICI rose by 2.1 points to 99.5.” The investor confidence index measures confidence or risk ap- petite by analysing buying and selling patterns of institutional investors. A greater allocation to equities indicates a higher risk appetite or confidence and a read- ing of 100. “European investor confidence had crested in September at an all-time high, so it is perhaps not surprising to see it come down this month,” State Street said. “The decline may be driven by deflationary fears in the region. Although the European Central Bank has engaged in covered- bond purchases, German opposi- tion to full-blown quantitative easing may have left investors wondering whether or not the ECB can do enough to combat headwinds to growth. “The correction in global investor confidence occurred despite a rise in the US. This highlights the weakness outside the US as the main cause of the re- cent turbulence in markets.” Europeans feel down ■ Ben Harvey Local super fund WA Super is hoping to poach the retirement nest eggs of the tens of thousands of New Zealanders who settle in Australia each year. Last year’s Trans-Tasman Por- tability scheme allowed migrat- ing New Zealanders to transfer their KiwiSaver funds to an Aus- tralian Prudential Regulation Authority-approved fund. But few Australian funds actively solicit for these funds. “The announcement of WA Su- per accepting funds transferred from KiwiSaver accounts is great news for New Zealanders who have or who are planning to settle in Australia,” WA Super chief executive John McNally said. WA Super said customers must transfer the full amount from their KiwiSaver account and warned that scheme did not allow for the funds to be transferred again should the individual relo- cate to a third country. Super NZ opportunity ■ Ben Harvey A drop in the value of the Austra- lian dollar made international shares the best-performing asset class over the past three months, according to Perpetual’s Septem- ber-quarterly review. Foreign shares returned 5.7 per cent, compared with a 0.7 per cent loss for Australian equities. Cash returned 0.7 per cent, Australian bonds one per cent and Austra- lian real estate trusts 1.2 per cent. Global real estate trusts took a pummelling, losing 4.4 per cent over the quarter, Perpetual reported. Foreign shares up I was recently contacted by a client who wanted to change his non-concessional contributions made into his self-managed superannuation fund into concessional contributions because he realised he had exceeded his non-concessional contributions cap by $100,000. I explained to him that you cannot simply just change the character of the contribution to avoid paying excess contributions tax. Under the taxation law, once you’ve make concessional contributions in excess of the concessional contributions cap (that is $30,000 or $35,000), the excess amount will auto- matically be treated as a non-concessional contribution and count towards the non-concessional contributions cap (that is, $180,000 or $540,000). However, if you exceed the non-concessional contributions cap, you cannot automatically treat the excess non-con- cessional contributions as a concessional contribution, even if you have not made any concessional contributions into your SMSF. Concessional contributions are contributions that usually fall under three categories: ᔢ Those made by an employer under superannuation guarantee law; ᔢ Salary-sacrificed contributions made by an employee due to an agreement entered into by the employer and the employee; or ᔢ Personal super contributions (that is, non-concessional contributions) made into an SMSF where the SMSF member has claimed a tax deduction in their personal income tax return. Most full-time employees can only make concessional contributions under a salary-sacrifice arrangement with their employer. For the arrangement to be treated as an effective salary-sacrifice arrangement under the law, it needs to be entered into before the employee is entitled to receive the salary. This means a legitimate salary-sacrificed arrangement cannot be made retrospectively. People who are able to claim tax deductions on their personal superannuation contributions (that is non-concessional contributions) are those who are unemployed or retired, self-employed, or people who receive income from employ- ment that is less than 10 per cent of their total income. They must also have lodged the paperwork with their SMSF before filing their tax return and their SMSF must have acknowledged their intention to claim the tax deduction. The person must also be under the age of 75. Once all these requirements are met their non-concessional contributions can then be treated as concessional contributions. Just because there are two types of contributions and two contributions caps does not make them available to everyone. Sometimes you may just have to pay tax on excess contributions. Two contributions, two caps but if you owe tax, just pay it super ■ Monica Rule ................................................................................. ■ Monica Rule is a self-managed super fund expert and the author of the Self-Managed Super Handbook. Leavers or Schoolies Week — the extended teenage celebration that marks the end of Year 12 — officially runs from November 24 to 27. There are personal safety tips for parents and kids on the offi- cial WA Government website, but one glaring omission is the im- portance of having financial pro- tection. Whether your kids are heading overseas or interstate, a comprehensive travel insurance policy should be a must. The combination of low-cost travel packages and cashed-up kids means that overseas holiday destinations such as Bali and Fiji are increasingly popular for leav- ers. But while food, accommoda- tion and shopping can be cheap, international party destinations come with increased risk of severe financial loss. Food poisoning, drink spiking or a punch-up outside a nightclub can all end in a local hospital stay that costs more than the original trip. In a worse-case scenario, pri- vate jet charter company, Pri- vatefly, advise that a rescue flight from Bali to Perth is likely to set you back by about $80,000. The Australian Embassy in Indonesia advises that evacuation funds usually need to be paid upfront. On the other hand, Canstar has calculated that a travel insurance policy for 10 days in Bali will set your school leaver back an aver- age of $79. Japan is a little more expensive, at about $102, and Thailand costs an average of $92 per person for a 10-day policy. It’s a small price to pay. If your kids are partying with- in Australia, domestic travel insurance can cover incidents such as stolen belongings, rental vehicle excess and cancellation due to illness or perhaps natural disaster. While the potential for finding yourself tens of thou- sands of dollars out of pocket because of a mishap within Aus- tralia is much less, insurance is still worth considering. Canstar found the average cost of a domestic travel insurance policy for 10 days to be $61. However, be warned. Your kids might have the best policy in the world but there are plenty of things that void the in- surance. Doing something silly while drunk is one example — most insurers exclude claims that occur either directly or indi- rectly from using alcohol. Any illegal activity is also excluded. And whatever you do, don’t let your child ride a moped without a valid Australian motorcycle licence (or ride pil- lion with someone unlicensed). Chances are your kids will be fine. But a relatively small premi- um may buy extra peace of mind. Cheap drinks, high costs: School leavers in Bali. International party destinations come with a higher risk of severe financial loss. Picture: Lincoln Baker Schoolies week, relaxation and risk Rottnest: Alcohol or illegal activity voids most insurance. Picture: Ben Crabtree ■ Justine Davies ................................................................................. ■ Justine Davies is finance editor at ratings company Canstar 10-DAY INSURANCE Cost for a 10-day travel insurance policy, per person for selected destinations: Where Min. Max. Av. Australia $29 $121 $61 Bali $33 $172 $79 Brazil $50 $220 $114 Thailand $42 $172 $92 US $50 $221 $120 Japan $50 $176 $102 Rounded to nearest dollar SOURCE: CANSTAR
