End of year
strategies and opportunities
2012
Agenda
1. Super - its still super!
2. Transitioning to retirement
3. Other opportunities
4. Where to from here?
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Agenda
1. Super - its still super!
2. Transitioning to retirement
3. Other opportunities
4. Where to from here?
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Choose your tax rate
Individual
• 45% - Top marginal rate + 1.5% Medicare Levy
• Discount of 50% on capital gains
45%
Company
30%
Super
15%
Pension
0%
• 30% Company tax rate
• No CGT discount
• 15% on earnings and deductible contributions
• 10% on capital gains - CGT discount of 33-1/3%
• Tax free earnings within super when drawing a pension
• Tax free pension payments once you turn age 60
• 15% tax offset on pension payments if over 55 and under 60
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Super is a tax structure not an asset class
No greater investment risk when investing through super
– you can invest in same assets
– Cash is an option
Bankruptcy protection
Low tax environment
Insurance
Cash
Super
Fixed
interest
Shares
Property
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Maximise your deductible contributions
More important to start salary sacrificing earlier than ever before!
– 9% compulsory super counts towards cap
*Transitional arrangements for over 50’s
Proposed legislation to allow continuation of $50,000 cap for over 50’s where
super balance less than $500,000
Deductible contribution cap
2011/12
2012/13
Standard cap
$25,000
$25,000
*Transitional (Over 50’s until 30 June 2012)
$50,000
$25,000
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Salary sacrifice under 50’s
Income
Superannuation
Guarantee
Maximum salary
sacrifice
Maximum sacrifice
percentage
$100,000
$9,000
$16,000
16.0%
$125,000
$11,250
$13,750
11.0%
$150,000
$13,500
$11,500
7.7%
$175,000
$15,750
$9,250
5.3%
$200,000
$15,775
$9,225
4.6%
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Salary sacrifice over 50’s
Income
Superannuation
Guarantee
Maximum salary
sacrifice
Maximum sacrifice
percentage
$100,000
$9,000
$41,000
41.0%
$125,000
$11,250
$38,750
31.0%
$150,000
$13,500
$36,500
24.3%
$175,000
$15,750
$34,250
19.6%
$200,000
$15,775
$34,225
17.1%
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Personal contributions can help plug the gap
Case Study
Brad (age 55)
Employed on a
package of
$180,000 plus SG
Was sacrificing up
to $50,000 cap.
From 1 July 12 may
only have $25,000
cap
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1
3
2
4
5
6
7
8
Year
Salary Sacrifice $34,225 (50K Cap)
Salary Sacrifice $9,225 (25K Cap)
Salary Sacrifice $9,225 plus $15,375 after-tax
Note: Assumes a return of 7% after fees and tax
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Maximise your personal contributions
Personal contributions capped at $150,000 pa
If under 65 you can bring forward 2 years of cap and contribute up to
$450,000
$150,000
30 June 2011
$150,000
30 June 2012
$450,000
30 June 2013
$0
$150,000
$150,000
30 June 2014
$0
10
$450,000
$150,000
30 June 2015
$0
Don’t forget super for a low income spouse
Co-contribution
Co-contribution up to $1,000*
Income up to $31,920 for full benefit or up to $61,920 for partial
Spouse contribution tax offset
Tax offset up to $540 for contribution of $3,000
Spouse income up to $10,800 for full or $13,800 for partial
* Government has proposed halving the co-contribution to $500 thereby reducing the cut-out
income threshold to $46,920
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Insure pre-tax with super
Pre-tax
contribution
Super
Life & TPD
insurance
Save up to 87% on pre-tax cost of funding Life and TPD premiums
Improve cash flow
Can hold through your SMSF
Taxable
income over
Marginal tax
rate
Pre-tax cost
Pre tax cost
outside super
in Super
Percentage
saving
$37,000
31.5%
$1,460
$1,000
46%
$80,000
38.5%
$1,626
$1,000
63%
$180,000
46.5%
$1,869
$1,000
87%
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Double the deduction on income protection
Income
protection
Personanlly
deductable
Income protection deductible personally
– Salary sacrifice – “otherwise deductible”
– Prepay 12 months in advance
Double up - Deductible contributions to super up to cap plus personal deduction on
income protection premium
Inside super – cash flow
Pre-tax
contribution
Super
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Maximise
contribution
cap
Agenda
1. Super - its still super!
2. Transitioning to retirement
3. Other opportunities
4. Where to from here?
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Transitioning to retirement
If you’re 55+ you may be able to:
Reduce your working hours
Use super to supplement your income
OR
Maintain fulltime work
Salary sacrifice to super
Draw tax effective income from Super
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Transitioning – let’s take Ian for example
Ian would like to boost his super without affecting his lifestyle
Salary $100,000 pa
Receiving $9,000 superannuation guarantee
Age 60
Ian
$41,000 salary
sacrifice
$26,685 income
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Super
Ian’s super accumulates much quicker
Current
Proposed
Gross salary
Less tax
$100,000
$ 26,450
Gross salary
$59,000
Net salary
$46,865
Net salary
$ 73,550
Pension income
(age 60)
$26,685
(tax free)
Net income
($46,865 + $26,685)
$73,550
Difference to super
$34,850 - $26,685
$8,165
Excludes Flood Levy, includes Medicare Levy
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Agenda
1. Super - its still super!
2. Transitioning to retirement
3. Other opportunities
4. Where to from here?
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Terry and Vicki ...
Both age 50 and happily married
Vicki’s an employee earning $200,000 per annum
– Maxed out concessional contribution cap
Terry no longer works due to poor health
They have recently sold an investment property
– Proceeds of $400,000
– Outstanding loan - $100,000
– Initially purchased 3 years ago for $300,000
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They seek advice
Repay property loan of $100,000
Put $100,000 into a margin loan in Vicki’s name
– Conservative portfolio of investments
– 50% LVR – borrow $100,000
– Prepay interest – assume rate of 10%
Surplus of $200,000 in term deposit (Terry’s name)
Vicki donates $2,000 to Cancer council
Prepay premium of $3,000 on income protection
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The result ...
Vicki
Terry
Gain ($100,000 split between two)
$50,000
$50,000
Assessable gain (after applying discount)
$25,000
$25,000
Prepay interest on margin loan
($10,000)
-
Prepay income protection premium
($3,000)
-
Donation
($2,000)
-
Assessable amount
$10,000
$25,000
$4,650
$1,725
Tax payable at marginal rate
Vicki’s assessable amount for this capital gain is $10,000 as opposed to
$25,000 if the strategy was not in place.
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Recycle your debt using home gearing
Borrow against equity in own home to invest in a growth portfolio
– Shares
– Property
– Managed fund
Income from portfolio used to pay non-deductible debt first
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How debt recycling works
Family
Home
Managed
funds
Interest
only
Investment
loan
(deductible)
Principal
&
Interest
Home loan
(not deductible)
Shares
Property
Income
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Prepayments
Prepay interest (simplified tax system)
Margin loans
Investment property loans
Equity access
Prepay other deductible expenses
Income protection insurance
Donations
Variation of tax
Section 15-15 notice
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Agenda
1. Super - its still super!
2. Transitioning to retirement
3. Other opportunities
4. Where to from here?
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Where to from here?
Choose what tax rate you want to pay
Start salary sacrificing early
Reassess your insurance needs
Have a disciplined approach
Get good quality advice
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Asgard Capital Management Limited ABN 009 279 592, AFSL 240695 (Asgard). Information current as at 1 January
2012. This publication provides 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. You should therefore consider whether information or
advice contained in this presentation is appropriate to you having regard to these factors before acting on it. You should
seek personalised advice from a financial adviser and your accountant before making any financial decision in relation to
matters discussed in this presentation. The taxation position described is a general statement and should only be used as
a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual
situation may differ and you should seek independent professional tax advice. Consider our disclosure documents which
include our Financial Services Guide available on www.asgard.com.au. © Asgard Capital Management Limited 2012.
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