Smart EOFY
strategies
For 30 June 2013
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Disclaimer
This information has been prepared by MLC Limited (ABN 90 000 000 402)
105-153 Miller Street, North Sydney NSW 2060, a member of the National Australia
Bank group of companies. This information was produced as an information service
and without assuming a duty of care. This information is for adviser use only.
It contains general information only. It does not constitute financial advice and
should not be relied upon as a substitute for financial or professional advice.
In preparing this information, MLC Limited did not take into account the
investment objectives, financial situation or particular needs of any particular person.
Before making an investment decision, a person needs to consider (with or without
the advice or assistance of an adviser) whether this information is appropriate to
their needs, objectives and circumstances.
The information in this presentation is based on our interpretation of relevant
laws as
at 1 April 2013 and is subject to change. No responsibility is taken for persons acting
on the information provided. Persons doing so, do so at their own risk.
• MLC is not a registered tax agent. If you wish to rely on this information to
determine your personal tax obligations you should seek advice from a
Registered Tax Agent.
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Agenda
 Why invest via super?
 Super strategies
 Insurance
 Other tax-effective year-end opportunities
 How I can help
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Why invest via super
Tax concessions every step of the way
1. When you contribute to super
• Make contributions from pre-tax salary
• Claim contributions as a tax deduction
• Get a Government co-contribution of up to $500
• Get a tax offset of up to $540
Now
Retirement
1 Includes a Medicare levy of 1.5%.
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Why invest via super
Tax concessions every step of the way
1. When you contribute to super
• Make contributions from pre-tax salary
• Claim contributions as a tax deduction
• Get a Government co-contribution of up to $500
• Get a tax offset of up to $540
Now
Retirement
2. While build up super
• Earnings in fund taxed at max. of 15%
• Earnings from investments in
own name taxed at up to 46.5%1
1 Includes a Medicare levy of 1.5%.
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Why invest via super
Tax concessions every step of the way
1. When you contribute to super
• Make contributions from pre-tax salary
• Claim contributions as a tax deduction
• Get a Government co-contribution of up to $500
• Get a tax offset of up to $540
Now
Retirement
2. While build up super
• Earnings in fund taxed at max. of 15%
• Earnings from investments in
own name taxed at up to 46.5%1
3. When use super to pay pension
• No tax on investment earnings
• Tax offset between 55 and 59
• Tax-free income at 60+
1 Includes a Medicare levy of 1.5%.
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Super EOFY strategies
Get more from your salary or bonus
•
For employees
•
Called salary sacrifice
•
Contribute pre-tax salary or bonus into super
•
Contribution taxed at max. 15%, not marginal rate up to 46.5%1
•
Grow retirement savings
•
Reduce tax payable on salary or bonus by up to 31.5%
You can only sacrifice prospective salary or a bonus into super
(ie income to which you are not already entitled) and need to
make an effective salary sacrifice agreement with your employer
1 Includes a Medicare levy of 1.5%.
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Salary sacrifice case study
William is aged 45
•
About to receive a $5,000 pa salary increase
•
Will bring his total salary to $100,000 pa
•
Considering salary sacrificing
this additional $5,000 into super
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Salary sacrifice case study
Per annum
Sacrifice pay rise
Receive pay rise
into super
as after-tax salary
Pre-tax pay rise
$5,000
$5,000
Less income
(N/A)
($1,925)
($750)
(N/A)
Net amount invested
$4,250
$3,075
Tax paid on earnings
15%
38.5%
tax at 38.5%1
Less tax on
super contribution
1 Includes a Medicare levy of 1.5%.
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Results (after 20 years)
$189,371
$200,000
$160,000
+ $69,886
$119,485
$120,000
$80,000
$40,000
$0
Receive pay rise as
after-tax salary and
invest outside super
Salary sacrifice
pay rise
into super
Assumptions:. A 20 year comparison based on $5,000 pa of pre-tax salary. Both the super and non-super investments
earn a total pre-tax return of 7.7% pa (split 3.3% income and 4.4% growth). Investment income is franked at 30%. All
values are after income tax (at 15% in super and 38.5% outside super) and CGT (including discounting).
Note: No lump sum tax is payable on the super investment as William will be 65 at the end of the investment period.
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Super EOFY strategies
Make tax deductible super contributions
•
For people who are self-employed or not employed
•
Make personal super contributions
•
Claim some (or all) of contribution as tax deduction
•
Grow retirement savings
•
Use deduction to reduce taxable income and income tax payable
To be able to claim a portion of your personal super contributions as a tax
deduction, you need to complete a valid ‘notice of intent’ form and give it to
your super fund within specific timeframes. If you don’t you may not be able
to claim a deduction. (You also need to be eligible to make a
contribution).
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Consider contribution caps
• Salary sacrifice and personal deductible contributions count,
along
with other amounts, to ‘concessional’ contribution (CC) cap
• The cap is $25,000 in 2012-13
• The caps are annual amount and you can’t carry forward any
unused amount to another financial year
• It’s really important you make the most of the cap each year,
particularly if you are approaching retirement
• Opportunity to make larger ‘last minute’ concessionally taxed
contributions no longer available
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Cap implications
•
Penalty tax of 31.5% payable are applicable on excess contributions for the
2012-13 financial year
•
Review this year’s contributions and remember that a range
of other items count towards this cap, including:
– super guarantee conts, including those from more than
one employer
– concessional conts made to fund insurance in super
•
Review contributions from 1 July, particularly if you are an employee
as the superannuation guarantee rate will increase from 9% to 9.25%
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Super EOFY strategies
Get a super top up from the Government
•
For people who earn:
– at least 10% of income from employment or self-employment
– a total income of $46,920 or less
•
Make personal after-tax contribution
•
Get up to $500 in free super from Government
•
Spouse may qualify for co-cont if you earn too much
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Co-contribution case study
Ryan is aged 40
• Employed on salary of $37,000 pa
• Wants to invest $1,000 in after tax
salary each year until he retires at 60
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Co-contribution case study
In 2012/13
Invest outside super
Make personal
super contribution
Amount invested
$1,000
$1,000
Co-contribution
$0
$331
Total investment
$1,000
$1,331
Tax paid on earnings
34%
15%
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Results (after 20 years)
$100,000
$80,000
$58,810
$60,000
+ $18,469
$40,341
$40,000
$20,000
$0
$1,000 pa invested
outside super
(no co-contribution)
$1,000 pa invested
inside super
(includes co-contribution)
Assumptions:. A 20 year comparison based on an after-tax investment of $1,000 pa. Both the super and non-super
investments earn a total pre-tax return of 7.7% pa (split 3.3% income and 4.4% growth). Investment income is franked
at 30%. All values are after income tax (at 15% in super and 34% outside super) and CGT (including discounting).
Note: No lump sum tax is payable on the super investment as Ryan will be 60 at the end of the investment period.
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Super EOFY strategies
Boost partner’s super and reduce your tax
•
For people who have a spouse who earns less than $13,800 pa
•
Make after-tax super contribution on their behalf
•
Get tax offset of up to $540
•
Grow spouse’s super and reduce your tax
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Other super EOFY strategies
Make insurance more affordable
Buy life and total and permanent disability insurance in super
Self-employed
Claim super contributions as tax deduction
Employee
Buy insurance in super with pre-tax dollars
Eligible for
co-contribution
Use co-contribution to help pay for future insurance
Concessions can:
• make it cheaper to insure through super, or
• enable you to purchase a higher level of cover
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Other smart EOFY opportunities
Prepay expenses
If want to bring forward tax deductions and pay less tax this financial
year, you could:
• pre-pay annual premiums for an income protection policy held in your
own name
• pre-pay up to 12 months interest on an investment loan (usually only
available with fixed rate facilities)
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Other super EOFY strategies
Pay less tax on investment earnings
•
Cash out non-super investment
•
Make personal super contribution
•
Earnings in super fund taxed at max. rate of 15% (proposed to increase
to 30% for people earning over $300k pa.)
•
Earnings from investment in own name taxed at up to 46.5%1
•
Reduce tax on investment earnings by up to 31.5%
•
Consider capital gains tax payable when selling asset
1 Includes a Medicare levy of 1.5%.
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Other smart EOFY opportunities
Manage CGT
If make capital gain on asset sale this financial year, consider:
•
triggering a capital loss by selling another investment, or
•
making a super contribution and claiming amount as tax deduction
(if eligible)
Both strategies could be used to offset capital gain and save tax
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Strategy wrap-up
30 June 2013
Super strategies
• Salary sacrifice contributions
• Personal deductible contributions
• Co-contribution
• Spouse contribution
Key issues to consider
• Review concessional contributions
• Review TTR strategy
• Make the most of your tax refund
Insurance strategies
• Buy insurance in super
• Pre-pay expenses
Other smart opportunities
• Invest non-super money in super
• Manage CGT
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Start planning for
EOFY 2013/14 now
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Next steps
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Questions
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