Superannuation
Tax-effective Strategies To Build Your
Wealth In Retirement
Speaker’s name
Title/department
April 2013
Disclaimer
This information was prepared by Securitor Financial Group Ltd, ABN 48 009 189 495 AFSL &
Australian Credit Licence (ACL) 240687 (Securitor) and is current as at January 2013.
Material contained in this presentation is an overview or summary only and it should not be
considered a comprehensive statement on any matter or relied upon as such.
This presentation contains general information only and does not take into account your personal
objectives, financial situation or needs and so you should consider its appropriateness having
regard to these factors before acting on it.
All case studies and examples used in this presentation are for illustrative purposes only and
nothing in this presentation should be construed as an indication or prediction of future
performance or results.
Any taxation position described in this publication should be used as a guide only and is not tax
advice. You should consult a registered tax agent for specific tax advice on your circumstances.
As the rules associated with the super and pension regimes are complex and subject to change
and as the opportunities and effects differ based on your personal circumstances, you should seek
personalised advice from a financial adviser before making any financial decision in relation to any
matters discussed in this presentation.
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April 2013
Agenda
What is superannuation (super)?
Super contributions
Tax-effective super strategies
When can I access my super savings?
Super taxation
Next steps
Questions
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April 2013
What is superannuation (super)?
Super is one of the best ways to save for retirement
By investing for the long term in a tax effective environment you can build
substantial wealth for your retirement years.
Advantages of investing in assets in the super environment include:
– Concessional tax treatment
– Ideal form of savings for retirement
– Insurance benefits can be attached
– Government co-contribution incentives
Super exists to help you provide for yourself in retirement rather than relying
on social security. As a result your super savings cannot be accessed until a
condition of release is met, such as retirement or reaching age 65.
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April 2013
Super contributions
Who can contribute to super?
Anyone under 65
Between 65 and 74 (work test* required)
Age 75 and over (only mandated employer contributions and SG after 1 July
2013 allowed)
* You must have worked at least 40 hours of gainful employment over a 30 consecutive day period during that financial year.
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April 2013
What are the types of super contributions?
Concessional contributions are beforetax super contributions, made to a
super fund by your employer, or if
you’re self-employed, those made by
you for which you claim a tax
deduction. These include:
Non-concessional contributions are
after-tax super contributions.
These include:
Personal contributions
– Spouse contributions
– Compulsory - Super Guarantee
– Government co-contributions*
– Voluntary - Salary sacrifice and
personal deductible
contributions
– Government low income
contributions*
– Contributions from the sale of
small business assets*
* These are not counted towards the Non-concessional contributions cap (see next slide for further information)
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April 2013
Mind the cap
The following table shows the caps that currently apply to both concessional
and non-concessional contributions. It also details the extra tax that would
apply to any amounts that exceed the cap.
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April 2013
Super strategies
April 2013
Super strategies
1. Invest inside super to save tax
2. Transition to Retirement (TTR)
3. Get more from your salary or bonus
4. Government co-contribution
5. Boost your spouse’s super and reduce your tax
6. Divide your super contributions with your spouse
7. Take control of your super with a self-managed super funds
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April 2013
Super strategies
1. Invest inside super to save tax
Investments held in super funds are taxed at 15% or less, rather than the top
marginal tax rate of 46.5% (including Medicare levy).
< age 65 - Non-concessional contributions are limited to $150,000 a year, or
you can bring forward two years’ worth of contributions by contributing up
to $450,000
> aged 65 – Non-concessional contributions are limited to $150,000 a year,
and you can’t make a super contribution unless you satisfy the work test
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April 2013
Super strategies
2. Transition to Retirement (TTR)
Transition to part time work without reducing your income
– Supplement reduced salary with tax-free or tax-effective income
payments from a TTR pension.
– May result in less retirement savings than if you continue to work full
time
Tax-effectively boost your retirement savings while you’re working full-time
– Contribute some or all of your pre-tax salary into super and withdraw a
tax-effective TTR pension to make up for the reduction in your takehome pay.
– Taxed at 15% by the super fund
– Limit is $25,000 for 2012/13 financial year
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April 2013
Super strategies
3. Employees can get more from their salary or bonus
Use salary sacrifice (‘giving up’ a part of your pre-tax salary) to boost your
super.
Salary sacrifice contributions within your concessional contributions cap are
taxed at a flat 15% rather than your marginal tax rate.
Maximum amount of CC you can make in 2012/13 is $25,000. Any
contributions exceeding this cap will be taxed at an additional 31.5%.
Contact your HR department to make salary sacrifice arrangements.
Note: you generally are not able to access your super money until you reach
your preservation age (currently age 55).
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April 2013
Super strategies
4. Government co-contribution
Helps low to middle income earners boost their retirement savings.
If your total income is less than $31,920 p.a. and you make personal (i.e.
after-tax) contributions to your super any time during 2012/13, then
Government will match your contributions on a $1 per dollar basis up to
$1,000*.
Refer to the table below to see how much you may receive:
If your after-tax contribution for the previous financial year is: $1,000
And your income is:
Your Government co-contribution is:
$31,920 or less
$1,000
$37,920
$800
$43,920
$600
$61,920 or more
$0
* The Government has announced that it intends to introduce legislation which if passed will reduce the maximum cocontribution to $500, and the upper threshold to $46,920
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April 2013
Super strategies
4. Government co-contribution cont...
A number of eligibility criteria must be met to qualify, including:
– You need to make a non-concessional contribution
– At least 10% of income from employment or business*
– You need to lodge a tax return for 2012/13
– You must be under 71 years of age (at the end of financial year)
– You must not be a temporary visa holder (some exceptions apply)
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April 2013
Super strategies
5. Boost your spouse’s super and reduce your tax
If your spouse is on a low income, you may be able to make contributions into
their super account and claim a 18% tax offset.
The offset:
– only applies to the first $3,000 of your contributions in a year, with a maximum
offset of $540.
– reduces as your spouse’s income rises above $10,800, and cuts out when your
spouse’s income is $13,800 or more.
Some requirements include:
– Both must be Australian residents when the contributions were made.
– Spouse must be no more than age 70.
– If the spouse is between age 65 and 70, they must have worked at least 40
hours over 30 consecutive days during the financial year.
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April 2013
Super strategies
6. Divide your super contributions with your spouse
Split certain contributions from your super account to your spouse’s super
account to receive tax concessions.
Table below shows what type of contributions can be split
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April 2013
Super strategies
7. Take control of your super with a self-managed super fund (SMSF)
An SMSF is a superannuation fund that you manage yourself.
It provides retirement benefits for its members in the same way as a regular super fund.
Setting up an SMSF has its advantages:
– More control. You can choose the investment strategy and the way it is implemented.
– Greater investment choice. You may be able to invest in things like property, art and
collectibles (some limitations may apply).
– Greater control over costs. Because you can control the investment management, you may
be able to minimise the fees and transaction costs incurred by the investment portfolio.
– More opportunities for tax-effective investments such as borrowing to invest.
– Potentially higher net returns. With the potential for lower costs and reduced tax, you may be
able to implement a more effective investment strategy and boost your after-tax returns.
There are numerous rules and regulations around establishing an SMSF, so it’s important to seek
professional financial, legal and tax advice specific to your circumstances.
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April 2013
When can I access my
super savings?
Conditions of release
To access funds from super via a lump sum or income stream a condition of
release must be met
There are various ‘pre retirement’ conditions of release including death,
permanent incapacity and terminal illness.
The retirement conditions of release are:
– Over the preservation age (currently at 55) and terminated gainful
employment and not intending to seek gainful employment in the
foreseeable future
– Genuine termination of a gainful employment arrangement after
attaining the age of 60
– Attaining the age of 65
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April 2013
Preservation age
Date of birth
Preservation age
Before 1 July 1960
55
1 July 1960 to 30 June 1961
56
1 July 1961 to 30 June 1962
57
1 July 1962 to 30 June 1963
58
1 July 1963 to 30 June 1964
59
After 30 June 1964
60
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April 2013
Super taxation
Choose your tax rate!
Individual
45%
Company
30%
Super
15%
Pension
0%
•Up to 45% - Top marginal rate + 1.5% Medicare levy
•Discount of 50% on capital gains
•30% Company tax rate
•No CGT discount
•15% on earnings and deductible contributions
•10% on capital gains
•Tax free earnings within super when drawing a pension
•Tax free pension payments once you turn age 60
•15% tax offset on taxable pension payments if over 55 and under 60
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April 2013
Tax treatment of accessing super savings via a
lump sum
* The amount is included in your assessable income and may impact your entitlement to other tax offsets
# Plan cap means the cap per super fund
April 2013
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Tax treatment of accessing super savings via an
income stream
Element taxed in the fund
Age
Superannuation lump sum tax rate*
Under preservation age
Preservation age to 59
maximum of 21.5%
First $175,000
0%
Amounts over $175,000
maximum of 16.5%
Aged 60 and above
0%
* includes Medicare
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April 2013
Example of lump sum withdrawal
Bernard is 56 years old with a superannuation balance of $500,000
The tax-free portion of his balance is $100,000 and the taxable portion
$400,000
He has not made any superannuation withdrawals previously
How much tax will he pay if he withdraws $300,000 as a lump sum (ignoring
Medicare levy)?
Withdrawal occurs in proportion: $100,000 / $500,000 * $300,000 =
$60,000 is tax-free component, therefore $240,000 is taxable component
Tax-free component is tax free
First $175,000 of taxable component is taxed at 0%, remainder taxed at
16.5%
$65,000 * 0.165 = $10,725
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April 2013
Example of income stream payment
Laura is 56 years old with a superannuation balance of $400,000
The tax-free portion of her balance is $50,000 and the taxable portion
$350,000
She rolls the funds into a superannuation income stream, and draws 4% as an
income payment on 1 July.
What is assessable income that is generated from the pension in the first
financial year? What is the amount of the 15% tax offset
Pension paid = 4% * $400,000 = $16,000
Tax free portion = $50,000 / $400,000 * $16,000 = $2,000, therefore
taxable portion = $14,000
Therefore assessable income = $14,000
Tax offset = $14,000 * 0.15 = $2,100
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April 2013
Next steps
Next steps
Speak to a Westpac Financial Planner to discuss your goals and financial
circumstances
Determine a super and tax-effective strategy which best suits for your
individual
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April 2013
Questions?