Retirement Planning and Superannuation Rowan Fielke - Director Thornton Group
Mar 31, 2015
Retirement Planning and Superannuation
Rowan Fielke - DirectorThornton Group
This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034.
This information was produced as an information service and without assuming a duty of care. This information contains general information only. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice.
This presentation does not take into account any persons particular objectives, needs or full financial situation. Before making a decision relating to this presentation a persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk.
Be sure that your adviser is Authorized Representative of a current Australian Financial Services License. Further to this make sure that your adviser is authorized to provide advice in the financial product groups or services that are contained and referenced to in this report.
The information in this presentation is based on our interpretation of relevant laws as at 22 October 2009 and is subject to change.
Disclaimer
Agenda1. Structuring & Tax Education2. Self Managed Superannuation Funds3. Key Benefits of Super4. Contributions and Tax5. Investment Choices6. Estate Planning7. Pension Planning8. Case Study9. Centrelink10. Who is Thornton Group?11. Questions?
Structuring & Tax Education Personal Tax Scales 2009/2010
* plus Medicare Levy
Any net capital gain is discounted by 50% if held greater than 12 months (pre 1985 CGT)
Taxable Income Tax Rate
$0 - $6,000 0%
$6,001 - $35,000 15%
$35,001 - $80,000 30%
$80,001-$180,000 38%
> $180,001 45%
Structuring & Tax Education Company & Trust Tax Rates for 2009/2010
* If no beneficiary, the trustee is taxed @ 46.5% ; ^ marginal tax rate of the beneficiary
Structuring & Tax Education
Entity Tax Rate *
Company 30%
Trusts
- distributed to company 30%
- distributed to beneficiary(ies) * MTR ^
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Structuring & Tax EducationSuperannuation Tax Rates for 2009/2010
* If the asset was held for 12 months or less, the full nominal gain is taxable^ 33⅓ discount method on complying superannuation funds
Super (Accumulation) Entity Tax Rate
Assessable Super Contributions 15%
Earnings 15%
Discount* Capital Gains (if applicable) 10%
Super (Pension) Entity Tax Rate
Earnings 0%
Capital Gains (if applicable) ^ 0%
Structuring & Tax Education
SMSF Growth SMSF Population Table
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09
Total number of SMSFs 278,244 295,703 314,971 355,693 383,633 410,318
SMSF Population Table - Quarterly Data 2009
Sep-08 Dec-08 Mar-09 Jun-09
Net SMSF Establishments 8,315 6,598 5,957 5,815
SMSF Assets
Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09
Total Australian and Overseas Assets ($m) 131,526 165,425 209,930 326,413 330,100 332,286
Superannuation Industry Assets - Quarterly Data 2009
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09
Total SMSF Australian and Overseas Assets ($m) 330,100 320,800 302,500 307,800 332,200
Total Super Industry ($m) 1,142,200 1,118,800 1,027,400 1,011,800 1,076,700
SMSF's as a Percentage of Total Super Industry 29% 29% 29% 30% 31%
Key Benefits of Super
Taxation Efficiency
Investment Choice
Estate Planning
Pension Planning
Structuring & Tax Education Contributions and Tax
Tax Rates
Contribution Limits
Salary Sacrifice
Government Co Contribution
Small Business Concessions
Franking Credits
Contribution LimitsContribution Limits for 2009/2010
* less than age 50; **greater than age 50 but less than age 75; ^ between ages 65 -75; ^^ less than age 65 - 3 year limit)
Concessional (CC)SG Contribution / Salary
Sacrifice
Non Concessional (NCC)
Capital Gains tax (CGT) Cap
$25,000* $150,000 ^
$1,100,000 Lifetime Limit
up to $500,000 Capital Gains - Small Business Retirement Exemption
disposal of business asset exempt from CGT – 15 yr
exemption
$50,000** $450,000 ^ ^
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Salary Sacrifice & Government Co Contributions Salary Sacrifice
Government Co-Contribution
A = assessable income including salary sacrifice contributions in income thresholds.
Contribution Tax
Concessional Contribution 15%
Assessable Income Contribution Co-Contribution
< $31,920 Any Amount $1,000 Max
$31,921 - $61,920 Any Amount Calculated $1.00 for every $1.00
> $61,921 Any Amount Nil
Structuring & Tax Education
Investment Choices Dispelling the Myths of Super
Superannuation is a structure not an investment
You can control how your monies are invested
Superannuation funds do not have to include volatile assets within your portfolio
SMSF
Cash / Term Deposits / Debentures Managed Funds
Direct Shares Direct / Listed Property
Commercial Property, Plant & Equipment
Farming Land Gold, Art, Wine
Investment Choices
Instalment Warrants
Introduced in September 2007, an instalment warrant is a structure
that allows you to borrow to acquire assets within a SMSF
How does it work?
Create an instalment warrant trust and investment strategy
Lender of your choice (bank or any entity) finances the asset
purchase through a limited recourse loan
The instalment warrant trust owns the asset
The SMSF is 100% beneficial owner of the instalment warrant
trust
Instalment Warrants
Who Benefits Most?
Wealth accumulators seeking to expand and further diversify the
portfolio of investments in their SMSF Business owners that wish to rent their own
property Investors seeking to take advantage of the
concessionally taxed environment of a SMSF relative to other
investment structures such as individuals or companies
Investors looking to build a property portfolio
Structuring & Tax Education Estate Planning
Binding Death Benefit Nomination
Reversionary Pension
Wills
Power of Attorney
Testamentary Trusts
Divorce
Pension PlanningIncome Streams
Account Based Pension (ABP)
over age 60, pension payments from taxed superannuation funds will be tax free.
lump sum withdrawals will also be tax free.
Transition to Retirement Pension (TRIS)
aged between 55 and 60, pension payments (less any tax
free amount will be taxable and receive a 15% tax offset.
from age 60 income, drawings 100% tax-free lump sum withdrawals will generally be subject to tax,
depending on your age, the total amount withdrawn
and your superannuation components.
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Case Study Current Scenario
Details Facts & Figures
Age 60
Retirement Age 70
Annual Income $50,000
Super Balance $500,000
Annual Net Income $41,450
Expected Return 6%
Structuring & Tax Education Case Study
Accumulation Phase
Balance = $500K
Tax Rate = 15%
Pension Phase
Balance = $500K
Tax Rate = Nil
Salary Sacrifice
$31,700
Withdraw Annual Pension Income
$23,150
Plus Income = $18,300
* Including Medicare Levy – using 2009/10 tax rates ; ^ 100% tax free pension income ; Mature Age Tax Offset (MATO)=$500 ; Low Income Offset=$1,350. These rebates cannot be refunded in the way of income. However any unused credits received from
franking will be refunded by way of income.
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Case Study
Salary Sacrifice & Pension Strategy Facts & Figures
Contributions Tax $4,755
Salary $18,300
Pension Income $23,150
Assessable Income $18,300
Income Tax * $1,845
Rebates ($1,850)
Total Tax Payable $0
Net Income $41,450
Do Nothing Facts & Figures
Income $50,000
Income Tax* $8,550
Net Income $41,450
Total Tax Savings* = $3,795
*Income tax less contributions tax
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Case Study Do Nothing Facts & Figures
Balance in Super Accumulation
$500,000
Earnings @ 6.0% $30,000
Tax on Earnings @ 15% $4,500
Total Earnings $25,500
Engage in TRIS Facts & Figures
Balance now in Pension Phase $500,000
Earnings @ 6.0% $30,000
Tax on Earnings @ Nil $0
Total Earnings $30,000
Super Fund Tax Savings
= $4,500
Note that the projections do not take into consideration
franking credits
Structuring & Tax Education
Case Study
Year Age Before Strategy
After Strategy Super
After Strategy TRIS
Total Strategy Benefit
1 60 $530,000 $26,945 $506,104 $533,049 $3,049
5 65 $669,113 $147,544 $534,409 $681,953 $12,840
10 70 $844,739 $346,855 $558,105 $904,960 $60,221
Super Accumulation & Pension Projection
Assumptions : SG Contributions payable on salary sacrifice contributions, 6% return, Nil indexation, drawing from pension approximately 4.6% of account balance; considers eligible rebates being low income and mature age offset for 2009/20010.
These projections are meant as a guide only and may not necessarily reflect the actual payments received. It has been published as an information service without assuming a duty of care. Subsequent changes may affect the accuracy of the calculation.
Strategy Benefit
$60,221
Centrelink
Commonwealth Seniors Health Card
What it is Benefits Eligibility
Age Pension
What it is Eligibility Rates Income And Assets Test
Other Benefits
Commonwealth Seniors Health Card (CSHC)
What is it?
It’s a card offered by the Federal Government to help with the cost of prescription medicines and other services if you are of Age Pension age but do not qualify for the Age Pension
Commonwealth Seniors Health Card (CSHC)
What services the card helps you with: Discount on prescription medicines
Bulk-billed GP appointments, at the discretion of the GP
A reduction in the cost of out-of-hospital medical expenses
above a concessional threshold, through Medicare Safety Net
In some instances, additional health, household, transport,
education and recreation concessions which may be offered by
State or Territory and local governments and private providers
You may also be entitled to receive the Seniors Supplement – a
non-taxable payment made every 3 months to help with regular
bills such as energy, rates and motor vehicle registration fees.
Commonwealth Seniors Health Card (CSHC)
Eligibility:
Be an Australian resident, living in Australia, and not subject to a
newly arrived residents waiting period Reached age pension age but do not qualify for Age
Pension (or do not receive certain other Social Security/Veteran
Affairs pensions/benefits) Provide Centrelink with your and your partner's tax file
number or be granted an exemption from providing your and your
partner's tax file number, and Have an annual adjusted taxable income* (ATI) of less
than: $50,000 (singles) $80,000 (couples combined), or $100,000 (couples combined who are separated due to
ill health)
* ATI = Taxable Income, Foreign Income, Total net investment losses, Employer provided benefits & Reportable superannuation contributions
Age Pension
What is it?
If you have reached retirement age, the Age Pension ensures you have a certain level of income in your retirement.
Age PensionEligibility:
You must first satisfy the age and residence requirements
- Age for males is 65 and for females this is increasing to age 65
Satisfy an Income and Asset Test (covered shortly)
If you are legally blind, you may be eligible for Age Pension (Blind),
which usually has no income or asset test
Age PensionCurrent Payment:
* Information as at 20 September 2009
$671.90 pf
$1,013 pf
$17,469.40 pa
$26,338 pa
Fortnight
Annual
Single
Couple(combined)
Age Pension
Income Test:
* Information as at 20 September 2009
Full Payment
No Payment
Single
Couple(combined)
Up to $142 pf ($3,692 pa)
Up to $248 pf ($6,448 pa)
Over $1,485.80 pf($38,631.80
pa)
Over $2,274 pf
($59,124 pa)
Age PensionAsset Test (Home Owner):
* Information as at 20 September 2009
Full Payment Part Payment
Single
Couple(combined)
$178,000
$252,500
Less than $594,750
Less than $925,500
Age PensionIncome Test:
What is included (some): Personal Earnings Net income from business,
including farming Deemed income Net income from property Family Trust Distributions Income from Income Streams Foreign income/pensions
What is NOT included (some): Deductible amount from an
Income Stream Rent subsidy paid from the
Commonwealth or State. Carer Allowance Emergency Relief Compensation or loss of, or damage
to,
building, plant & personal effects
Age PensionAssets Test:
What is included: Home Contents Motor Vehicles/Boats Holiday Home Bank Accounts Investments Share of Business/partnership
What is NOT included: Family Home * Funeral Bonds (up to $10,750) Gifts up to $10K pa & within
$30K over a rolling 5 year
period
* On land of 5 acres or less
Age Pension – Important NoteIncome and Asset Test Assessment:
Centrelink apply both the Income and Asset Test, and whichever test pays you the least, is the test which is applied in your circumstances.
Ie. If you qualify for the full rate of pension under the Income Test, however, your assessable assets are over the cut-off threshold, then no benefit is payable.
Other Centrelink Payments
Disability Support Pension
Carer Payment
Carer Allowance
Newstart Allowance/ Sickness Allowance
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Who is Thornton Group ? Country Culture
Superannuation and Retirement Specialist
Professional and Expert Investment Advice
In house Research Capabilities
Provides Continued Support and Advice
Fee for Service Philosophy
Dynamic Team Service
Are You Doing Things the Hard Way?