Neil Rogan

Neil Rogan, General Manager for Investment Bonds at Centuria says tax-effective plans to invest savings outside of super could be the best response to recent changes.

“In line with the government’s goal to improve the fairness and sustainability of the super system, Australians with lower super balances or lower or irregular incomes will find it easier to save for retirement.

The improvements include:

• For people who have less than $500,000 in superannuation; a carry forward of unused concessional contributions for up to five years, effective 1 July 2018.
• A tax deduction for personal super contributions for most people under the age of 75 (and subject to the work test between ages 65 and 74) from 1 July 2017.
• A low-income superannuation tax offset for eligible people who have an adjusted taxable income up to $37,000, subject to certain caps.

For Australians earning higher salaries or with larger super balances, the changes will reduce their ability to use superannuation to grow their wealth due to the transfer balance cap of $1.6m.

These are major changes for wealthier Australians, may wish to consider alternatives to invest their money for the long-term in a tax efficient vehicle.

Tax-effective strategies to help grow your wealth with limits to superannuation now in place, investment bonds could be a suitable tax-effective alternative to invest for retirement and grow your wealth. With marginal tax rates on personal income as high as 45% (plus a Medicare levy of 2%), many investors are looking for new ways to invest their retirement savings or other money.

Investment bonds are simple and flexible, and offer investment options across a range of different asset classes and portfolio combinations. They are tax-free in the hands of the investor if held for 10 years, but funds can also be accessed at any time if required.”

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• 50% reduction in asset sale fees
• Elimination of 2.0% of assets “poison pill” fee

Additionally, Opus Capital was reported as making a commitment  to the investment community through the largest industry research house to halve the $3.0 million acquisition fee proposed in their Opus 21 trust recapitalisation proposal and to waive year one fund management fees in line with the Century proposal. Opus Capital CEO Dean Palmer stated during the meeting that the Opus Capital board will make the reduction in the one off acquisition fee but stated that the research house was in error regarding the waiver of one year’s management fees. Taken together these amendments constitute multi-million dollar fee savings for unitholders.
 
Mr McBain concluded:  “We are very pleased that we stood up for Opus 21 unitholder rights and we are particularly gratified that we have ensured that Opus 21 fee levels have been reduced to market levels on an ongoing basis. Of particular note is the support Century received from major financial advisory groups throughout the country, the advisers we spoke to were very committed to a management change and we are very grateful for their endorsement.”
 
“Century is about to settle a circa $40 million property acquisition in the Brisbane CBD for Century Property Trust 14 – which is already heavily over-subscribed. Additionally, Century has agreed terms on a circa $30 million NSW asset which will form the basis for a further Century property fund.
 
“Century has a very busy asset acquisition programme over the next 12 months and anticipates considerable growth within its $900 million Property Funds Management area.”

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Century Funds Management (Century) has announced that it will waive the first year of its management fees if it is successful in being voted in as manager of Opus 21.

 Century will use the net savings to immediately reduce debt with Opus 21’s bank lender. Based on 2010 accounts, waiving the fund management fee will immediately reduce the debt by close to $1.3 million.

 In a motion requested by a number of major financial planning firms, which represent some 25 per cent of unit holders, Century is currently seeking to replace the beleaguered Opus as manager for the unlisted property trust – Opus 21. Over 90% of the proxies received to date are in favour of removing Opus as the manager of Opus 21.

 Opus 21 is an open-ended, unlisted diversified property trust with assets valued at over $242 million. Subject to unitholder approval, Century will convert it to a terminating fund with the aim of providing an exit point in the medium term in an improved property market.  Over 400 financial planners Australia-wide have clients invested in Opus 21. 

 Investors will have the opportunity to vote for Century to take over management of Opus 21 at a special unit holder meeting to be held in Brisbane on 28 February 2011.

 “This undertaking further aligns Century’s interest with those of investors in restoring value to this poorly managed fund,” said John McBain, CEO of Century’s parent company, Over Fifty Group. “Unit holders in this fund have seen a long and continuing reduction in the value of their holding, we’re offering an opportunity for change, far greater transparency and better management.”

 “This undertaking is in addition to our ongoing commitment to Opus investors to provide financial support for a modest equity raising to be approved by investors as well as the proposed fee reductions – including halving of property sales fees,” Mr McBain said.

 In discussions with financial planners and unit holders Century has raised a range of concerns with Opus’s management of the Fund, including:

• Loss of 74% of the value of original investment in Opus 21. Their $1.00 per unit investment is now worth only $0.26 and distributions are a miniscule 0.003% pa of the original investment. 
•  $17.3 million related party loan from Opus 21 made without unit holder permission to another Opus fund, G1, that was subsequently written down by 90 per cent to $1.7 million
• A highly geared structure – 76.7% as at 30 June 2010; and a significant debt burden across all funds managed by Opus which threatens Opus 21’s ability to refinance outstanding debt on reasonable terms
• An outstanding legal appeal by ASIC  against the AAT’s decision to reinstate Opus’s Australian Financial Services Licence (AFSL)
• A number of related party transactions, such as a lease agreement with Tretecnic, a company in liquidation which shared two Opus related directors
• Lack of available information regarding the track record of the newly installed board at Opus
• Excessive exit fees charged by Opus for the sale of properties

“We have been speaking widely with financial planners in recent days, showing the sad but unarguable story that the balance sheet tells and putting our clear plan for improving the fund’s future,” Mr McBain said.

 “Our discussions have been an eye-opener for planners, who once the surprise abates, are angered by the truth, having not earlier appreciated the level of mismanagement, and subsequent cost to unit holders.”

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