When you are building up your superannuation, you can salary sacrifice and pay no more than 15% tax on your income. The earnings on your growing super are taxed at not more than 15%, rather than up to 49%, and capital gains are taxed at 10% rather than up to 23.5%.

Let’s imagine you decided to invest $10,000 a year for the next ten years. The table shows the comparison between salary sacrificing into super and investing it personally at different tax rates.

If you are on the top tax rate, you will have 89% more saved after ten years. And it gets better over time – after 20 years you would have 122% more! There will be no limits on how much you can have in superannuation and no penalty tax rates.

Once you retire after age 60 you can draw on your super either as a pension or by taking lump sums and it will be tax-free. If you leave it to accumulate, the fund will pay tax as described above. If you convert your super to a pension all income and capital gains are tax-free. You have the freedom in how you manage your retirement savings.

Can it really be this good?

There will be times when superannuation may not be the best solution. For instance, your money is locked away until retirement and there are limits on borrowing to invest.

Superannuation rules limit how much can be contributed tax-effectively to super:

After-tax (undeducted) contributions

• Limited to $180,000 (indexed) per person per year.

Pre-tax contributions

• Limited to $30,000 per year for those aged under 49; and $35,000 per year for people 49 and over.

Over the long term, these rules may actually make super simpler, but in the meantime, it is a good idea to get assistance in stepping through the current maze of rules.

Note: Tax rates include 2% Medicare Levy and 2% Temporary Budget Repair Levy for taxable incomes over $180,000 p.a.

For more information, contact us at Leenane Tempelton on 02 4926 2300 or email success@leenanetempleton.com.au

The post Time to rethink your super strategy? appeared first on Newcastle Financial Planners & Financial Advisors.

Recent changes to superannuation legislation present exciting opportunities when it comes to ways of funding life insurance. With choice, however, comes complexity and the challenge is to isolate the benefits offered by the various funding alternatives.

Behind the scenes

The story behind widening the choice for consumers involves two key factors.

Firstly, recent changes to the superannuation regulations introduced a new obligation for super fund trustees to respond to requests from members to roll over funds to another super fund within specific timeframes. This measure was introduced by the Government to give consumers freedom of choice as to the location and spread of their superannuation money.

The second factor is the use of contributions tax rebates. Superannuation funds generally receive a tax deduction for life insurance premiums.  Many super funds are now passing that benefit on to the contributing member, allowing the member to reduce the cost of their life insurance cover.

The combination of these two features may provide you with the opportunity to reduce your costs. If your life insurance needs are not being met by your existing superannuation fund, you can access more suitable life insurance cover via another super fund. It is now possible to fund the life insurance by a rollover from your existing fund. The amount rolled over may also be reduced by a 15 per cent tax rebate, delivering a substantial reduction in the cost of your new life insurance arrangements.

But there are considerations…

Before you commit to going down this new path, you should ensure that this option is best suited to your circumstances. You should consider the following three points:

• Erosion of retirement savings. There is no free lunch. The use of accumulated balances in your existing superannuation fund to finance your life insurance needs will reduce retirement savings.
• You may be able to fund the contributions to your life insurance superannuation fund by contributions from your employer under a salary sacrifice arrangement. In this case, as you receive the tax benefit via the salary sacrifice arrangement, you will not be eligible to receive a contributions tax rebate.

• If you are self-employed, the funding of life insurance needs via a tax deductible personal contribution into super fund may be more efficient. In this case, as you would receive the benefit of a tax deduction for your superannuation contributions, you would not be eligible for the contributions tax rebate.

• If you have a self-managed superannuation fund (SMSF), the optimum insurance solution may be to continue the traditional financing structure. Under this structure, the trustee of the SMSF owns the life insurance policy, and can access the benefit of any tax deduction associated with the premium. Introducing the complexity of a rollover arrangement may not deliver any additional benefit.

The way forward

The broadening of insurance payment options now gives you a substantial opportunity to ensure that your life insurance arrangements are completed on the most cost effective basis.

If you are eligible for this rebate, and a rollover provides a definitive advantage, all that’s left is to make sure you are comfortable dipping into retirement savings to pay for peace of mind today.

For more information about insurance through super, speak to your Leenane Templeton financial planner on 02 4926 2300

Source: TAL

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Most people are familiar with the idea of leaving the house, the boat or the stamp collection to someone in (or sometimes outside of) their family through their will. But what about super – what happens when you die and how can you make sure your loved ones aren’t unreasonably disappointed? 

Your estate

The assets that you own form your estate and are distributed according to your will.  You can choose to give your assets to anyone.  If you don’t have a valid will, your assets are distributed according to legislation.  Your assets are property you own personally like bank accounts, shares, managed funds, real estate and lifestyle assets (such as cars and boats).  Assets held by companies or in trusts do not form part of your estate.  

Your super

Although superannuation is held in your name it’s not yours – the super fund trustees hold it in trust for your benefit.  If you die, superannuation legislation requires them to pay the money to your dependants.  This means to your spouse, your children, someone who is financially dependent on you or someone living in an interdependent relationship with you.

The aim of this legislation is to enable the trustees to pay out the super quickly on the production of a death certificate.  In most cases, this is quicker than finalising your estate.  Sadly, in some cases, family disputes mean that even a superannuation payment is delayed.

What can you do?

It is important to know that the super fund trustees should consider the intentions of your will in making a decision, so make sure you have one and that it is up-to-date. You might also be able to instruct the trustee directly of what you want to happen, under a “binding / non-binding nomination” or similar facility.

It is also worth thinking about telling your beneficiaries what you intend, as this will give them the chance to prepare for the outcome rather than be surprised at a difficult time. And, as always, seek advice on a tailored plan for your personal circumstances.

Sources:
www.tag.nsw.gov.au
www.findlaw.com.au

To discuss your super further 
Call (02) 4926 2300 or email us. 

Our expert and friendly team are here to help with any questions you may have in relation to what haapens to your super when you die and how to make sure everything is in order. 

The post What happens to your super when you die? appeared first on Newcastle Financial Planners & Financial Advisors.

There will be no changes to the super contributions caps for the 2015/16 year. 

Limits will remain the same as last year:

It's important to note that Super Guarantee contributions on salaries of more than $315,000 per year will be in breach of their caps without anything else being counted. 

If you wish to discuss Super caps further, please do not hesitate to contact the team at Leenane Templeton on (02) 4926 2300 or email us. 

The post No changes to Super caps appeared first on Newcastle Financial Planners & Financial Advisors.

The Federal Government has introduced a series of reforms, known as ‘Stronger Super.’

These reforms are set to deliver major changes to Australia’s superannuation system. Stronger Super will impact super funds, their members and employers.

The aim of the reforms is to create a more efficient super system focused on the best interest of members.

Some elements of the reforms are:

MySuper

MySuper is a simple, low-cost superannuation product that will replace the current default products and become the new default superannuation fund for businesses.

MySuper has been introduced to help simplify and give greater transparency to superannuation systems. MySuper accounts will offer lower fees and simpler features, so members will not have to pay for services they do not need.

As of 1 January 2014, businesses must be paying their superannuation contributions to an authorised MySuper fund. Business owners only need to choose a new super fund if their current one is not MySuper authorised.

Employees are still able to select their own fund, or manage their superannuation affairs through a self-managed superannuation fund.

SuperStream

SuperStream is the name for a range of proposals designed to improve the processing of everyday superannuation transactions.

SuperStream is aimed at increasing the processing speed of transactions, reduce error and remove human involvement from the system to reduce the time between the employer’s contribution being made and its allocation into the members account.

From 1 July 2014, employers with 20 or more employees will have to be compliant with SuperStream, and smaller employers will have to be compliant from 1 July 2015.

SMSF

Individuals with a SMSF will need to provide their employer with their fund’s ABN, bank account details and electronic service address to ensure they comply with the superannuation changes.

This information should be provided by 31 May 2014 to ensure that the individual’s super does not go into a default fund.

Our superannuation and financial planning specialists are at hand to deal with any questions or queries regarding this article.
Call (02) 4926 2300 or email us.

Disclaimer

If you would like to discuss your the new reforms and your Superannuation further contact us today!

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