SUPER GU Y

SUPER GUY’S Super Tips 2019/20

Chris Strano has been involved in superannuation advice for well over a decade. He has worked in numerous roles including adviser, consultant and paraplanner; and was previously a sitting committee member for the QLD Chapter of the SMSF Association (formely SPAA).

He currently assists leading advisers across Australia with the preparation of strategic advice for their clients.

Chris has achieved a Diploma of Financial Planning, a Master’s Degree in Taxation and SMSF Specialist Advisor Accreditation.

MAXIMISING SUPER

Contributing to superannuation can have significant immediate and long-term tax benefits. But how much should you be contributing to super and what type of contributions should you be making?

FINISH READING ON PG. 2

ACCESSING SUPER Do you know when you are allowed to

access your super savings? More importantly, do you know when you

should access your super?

Super can be accessed as a lump sum or an income stream. So what’s best for

you?

FINISH READING ON PG. 3

MINIMISE TAX

It’s true that superannuation is tax-effective in itself; however, there are

plenty of little tricks to further reduce tax within super that you might not know

about.

FINISH READING ON PG. 4

2

MAXIMISING

SUPER Contributing to superannuation can have significant immediate and long-term tax benefits. But how much should you be contributing to super and what type of contributions should you be making?

In the current financial year (2019/20) the most you are able to contribute to superannuation depends on the type of contribution being made. The two types of contributions are Concessional and Non-Concessional.

The annual Concessional contribution cap is $25,000 per person and includes employer SG contributions, salary sacrifice contributions and personal concessional contributions.

The annual Non-Concessional contribution cap is $100,000 per person. However, while under age 65, you can ‘bring-forward’ up to two years worth of the cap – allowing you to contribute $300,000 over three financial years with no regard to the annual cap. There’s also the new ‘home downsizing’ contribution that individuals over age 65 can take advantage of.

The main benefit of super contributions is that, once contributed to super, all earnings derived from that amount will be taxed at a maximum of 15% in accumulation & TTR pension phase and 0% if you start an account based pension. These tax rates can be significantly lower than your individual tax rate.

The added benefit of Concessional contributions is that the contributor receives a tax deduction for making the contribution. The benefit of Non-Concessional contribuions is that they will always enter and exit your super account tax free.

How much should you contribute? How much you contribute is up to you. When it comes to Concessional contributions, you should generally only contribute to the point where the contributions tax rate is less than your individual tax rate. The standard contributions tax rate is 15% (and 30% for high-income earners & 0% for low-income earners). It is important to understand that all contributions to super can’t be accessed until certain conditions are met, which is the trade-off for the tax-concessions received. Don’t contribute money you might need before retirement.

Before making contributions to super, you should always consider your previous contributions, contribution caps, age limits and the inability to make non-concessional contributions for individuals with balances exceeding the Transfer Balance Cap.

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Do What

You Want

When You

Want

ACCESSING SUPER THE HOW, WHEN & WHY

Do you know when you are allowed to access your super savings? More importantly, do you know when you should access your super?

Super can be accessed as a lump sum or an income stream. So, what’s best for you?

Aside from death, disablement or financial hardship, you will need to meet your superannuation preservation age before being able to access you super. Your preservation age can range from age 55 – 60 depending on when you were born.

However, reaching your preservation age does not provide you with immediate and full access to your super. If you are still working, you can start a transition to retirement income stream, which limits the amount of access you have to your super; or, if you are retired, after reaching your preservation age you may be entitled to full access to your super, depending on your employment situation.

Once you reach age 65, you will have unrestricted access to your super.

It’s very important to know what level of access you have to your super, because accessing your superannuation before meeting the relevant superannuation conditon of release can result in hefty penalties.

In general, acessing your super prior to age 60 will often result in some or all of the withdrawal being assessable for tax purposes. Withdrawals from super over age 60 are, for the most part, tax free.

Traditionally, your superannuation retirement savings would stay in accumulation phase until you had completely retired from the workforce, at which point your retirement savings would be converted to an income stream to assist in covering your retirement expenses.

However, these days, people are working longer, the defintition of retirement is constantly challenged (philosophically) and there are a myriad of options available to you once you have reached your preservation age; making the decision of when to access your super more confusing.

In an attempt to provide you with guidance, consider this:

• leaving super untouched for as long as possible is always a safe and beneficial option.

• If you are looking to incorporate some tax minimisation strategies, or cut back to part-time work, a transition to retirement income stream may be helpful – usually much more beneficial after age 60 though.

• Accessing super prior to reaching Age Pension age may affect your partners Age Pension payments.

• If over Age Pension age, is there a way of transferring super into a spouses super accumulation account who is under Age Pension Age, reducing the level of assessable income and assets?

Remember, when people near retirement, they often try to tip as much into super as possible. There’s a reason for that – tax concessions.

Don’t be in such a rush to make withdrawals from super without a well-though out plan first.

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MINIMISE TAX It’s true that superannuation is tax-effective in itself; however, there are plenty of little tricks to further reduce tax within super that you might not know about.

The main types of taxes relating to super that can be reduced through clever strategies include:

• Superannuation Earnings Tax • Death Benefits Tax • Pension Income Tax

Superannuation Earnings Tax

All earnings received from investments within ordinary accumulation phase of superannuation or within a transition to retirement pension account are taxed at up to 15%.

Superannuation earnings tax can be reduced to 0% by transferring your retirement savings into an account based pension. Remembering that you need to have reached age 65 OR reached your preservation age and be retired with no intention of ever returning to full-time or part-time work before being allowed to commence an account based pension.

You might not need the income, but is there a way you could contribute the total pension payments back into super; thereby maintaining your overall balance, but reducing superannuation earnings tax?

On a balance of $500,000 and income earnings of, say, 4%; this could reduce tax by $3,000 every year!

Death Benefits Tax

Death benefits tax is payable when your super savings are paid to a non-tax dependant (e.g. adult child) when you pass away. The death benefit tax rate is 15% plus the Medicare Levy on the ‘Taxable’ component of your balance. By using strategies, such as a recontribution stratgy, to convert your Taxable Component to Tax-Free components, you can reduce potential death benefits tax.

Pension Income Tax

As we know, pension payments over age 60 are generally tax free, but how are pension payments taxed when you’re under age 60? Basically, the tax-free component of your balance is received tax free, but the taxable component is taxed at your individual tax rate, minus a 15% rebate.

Implementing a recontribution strategy to reduce the taxable component and increase the tax-free component of your balance can reduce assessable pension income for those under age 60 and protect against possible changes to the taxation of income streams for people over age 60.

DISCLAIMER: The information contained in this document and on the SuperGuy website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on SuperGuy’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Although every effort has been made to verify the accuracy of the information contained in this document and the SuperGuy web site, SuperGuy, Chris Strano, and all related entities disclaim all liability, for any error, inaccuracy in, or omission from the information contained in this document or on the website or any loss or damage suffered by any person directly or indirectly through relying on this information.