The only way to create wealth is to do it slowly. Wealth creation takes time, patience and discipline. The outcome if you do it that was is virtually guaranteed.
Superannuation is the most tax effective way to save for the lifestyle you want when you retire. It is a key component of any investment portfolio and offers a wide choice of investments.
By law, employers must contribute a minimum set percentage of 9.5% of each employees pay into a regulated superannuation fund or pay a charge. This is known as the superannuation guarantee.
However, this will not provide enough for the lifestyle you want in retirement.
We can help you identify your superannuation strategy and objectives as part of your personalised financial plan/ We can also provide advice on the most appropriate super for your situation and assist with the following:
Help make super easy to understand
Help you choose the most appropriate fund for you, personalising your super from an extensive super fund panel
Have a strong track record of investment performance with our clients
Provide you with access to your super online
Keep you informed and up to date with regular reviews so you can make the most of your super
Maintain our strong track record of investment performance
We can also help find your lost super or consolidate your super accounts into one so that your retirement savings are working hard for you. We educate you to understand:
Why you need to plan for retirement
How to choose the right fund
When you can access your super
What is Salary Sacrificing
What is a co-contribution strategy
A sacrifice now is a win-win
Here are the facts
Salary sacrifice can be a smart way to boost your super. When you sacrifice some of you salary to super, you not only increase the amount of dollars you will have in retirement, but you can reduce the income tax you have to pay now. What's more, salary sacrifice is hassle free because your employer makes the contributions for you.
What is Salary Sacrifice?
Salary Sacrifice is when you arrange with your employer to contribute some of your future pre-tax salary into a variety of benefits. Additional superannuation payments is one of these benefits. In essence, you let your employer put some of your pre-tax salary into your super account rather than receive it in your pay packet.
What are the tax advantages of salary sacrifice?
Lower your taxable income - by Salary Sacrificing part of your salary into super you are effectively reducing your taxable income. This means that you pay less tax. I fact, depending on how much you sacrifice into super you could even jump into a lower tax bracket. For example, someone who earns $80,000pa base salary who sacrifices $5,000 per year into super will jump from the 39% tax bracket, assuming no other income.
From 1 July 2016
More money in your super
The great feature of salary sacrifice is that the dollars you contribute to super are pre-tax dollars rather than post-tax dollars, which may mean more money for your account and more money to earn compound interest to build a greater retirement income. Salary Sacrifice contributions are taxed at just 15% when they enter your account. This may be much lower than the marginal tax rates you pay, which can be as high as 49% (including the Medicare Levy). Generally the higher your income, the more tax savings can be made by sacrificing your money into super.*
For example, if you were in the highest tax bracket of 49% (including Medicare Levy) then $1,000 of your pay equates to:
$510 in your pocket, or
$850 in your super account
*If you earn under $51,021, then you may be eligible for a Government Co-Contribution if you make a personal contribution from your post-tax salary (salary sacrifice contributions are not eligible for the co-contribution). Please see your financial advisor to see whether salary sacrifice is the best option for your circumstances.
Less tax payable on investment earnings
When you invest your money outside super, your personal income tax rate of up to 49% (including the Medicare Levy) may apply on any investment earnings, and capital gains tax may apply on the sale of investments. In contrast, any earnings on salary sacrificed contributions in super are subject to lower rates of tax ie. 15% on earnings and 10% on capital gains.
Transition to Retirement
What is 'transition to retirement'?
If you are 55 and over, you now have the option of easing into retirement, by reducing your working hours without reducing your income. You can top up your reduced income with a regular 'income stream' from your superannuation savings. This is called the transition to retirement measure.
However,you need to be aware what impact this measure can have on you and your personal circumstances. Some parts of this measure are complex, and equally complex to set up and maintain.
Confused about whether you can access your super while you are still working?
Here are some facts:
Until recently, once you turned 55, you only had two options when it came to thinking about retirement:
Retire from work completely and take your super savings as a lump sum payment or a retirement income stream
Keep on working and contributing to super
If you're 55 or over, you can now have your cake and eat it too!
From 1 July 2005, those of us 55 or over can continue to work and also access some of your super as a regular payment to supplement your income. The options provide flexibility to maintain, increase or reduce working hours and still maintain or improve your lifestyle.
Transition to retirement legislation
On 1 July 2005, the government introduced 'transition to retirement' legislation - effectively allowing those of us aged 55 or over to keep working and also tap into their super as a 'non-commutable pension'.
What are the benefits?
The lifestyle and financial gains can be substantial. Transition to retirement means you can:
Supplement your income from your super
Reduce your tax liability - minimising income tax, Medicare Levy and Capital Gains Tax
Salary Sacrifice your working salary into super for further tax benefits
Claim the Mature Age Workers Tax Offset up to $500
Enhances your lifestyle
What's a non-commutable pension?
Non-commutable means that there are some cashing restrictions placed on it and you must take the money as a regular income payment. You cannot take this super money as a lump sum cash payment until your full retirement. Of course there are some exceptions to this rule.
Do I have to reduce my working hours?
Transition to retirement was designed to give you flexible lifestyle choices. There are no maximum or minimum hours you must work. Taking your super savings as a non-commutable pension empowers you to participate in significant benefits normally given to those who previously had to fully retire.
Should I consider using transition to retirement?
Transition to retirement is designed to benefit many Australians aged 55 and over, and may be relevant if you:
Plan to scale down working but maintain your after-tax income
Have direct property investments in your self managed super fund and wish to capitalise on the current property market prices (and pay no CGT) rather than waiting for permanent retirement
Have unrealised capital gains in your sup[er fund investment portfolio and wish to switch portfolios in a tax effective manner
Prefer to be in an environment where no tax is payable on investment earnings
Wish to obtain an additional 15% tax offset on your taxable pension income (if aged 55 - 59)
Wish to obtain tax-free pension income (if aged 60 and over)
The value of professional financial advice
Australian legislation is complex, and making the correct financial decision can be difficult. Professional financial advice can add real value to your current lifestyle and future financial security. By analysing your specific circumstances, your financial adviser can design a transition to retirement strategy to maximise your income, minimise your tax and even enhance your lifestyle choices.
Which pensions can provide transition to retirement?
Allocated pensions and growth pensions (term allocated pensions) can be used for transition to retirement. However, if you use an allocated pension,it must be non-commutable' and not all product providers offer this.
If you choose to take advantage of the transition to retirement facility, you can always change your mind, retire or in some instances, cash certain types of superannuation money.
So if you are 55 or over and still working, the transition to retirement facility allows you to effectively increase your income payments and minimise your tax liability. You can salary sacrifice into super (15% contributions tax with no surcharge), transfer assets from super to pension phase (no CGT), pay Nil tax on investment earnings, and draw down a non-commutable allocated pension payment (with 15% tax offset on the taxable component if aged 55 to 59) to replace any loss in income resulting from super salary sacrifice or drop in salary - for anybody aged 60 and over the allocated pension income is tax free!
Concessional contributions include:
Employer contributions (including contributions made under a salary sacrifice arrangement)
Personal contributions claimed as a tax deduction by a self-employed person
If you have more than one fund, all concessional contributions made to all your funds are added together and counted towards the cap.
People aged 49 years or over on 30 June 2014 the concessional contributions cap was temporarily increased to $35,000 for the:
2014-15 financial year or a later financial year if you were aged 49 years or over on the last day of the previous financial year
The temporary higher cap is not indexed and will cease when the general concessional contributions cap is indexed to $35,000.
Non-Concessional Contribution Caps
Non-concessional contributions include personal contributions for which you do not claim an income tax deduction.
If you have more than one fund, all non-concessional contributions made to all your funds are added together and counted towards the cap. For the 2016/17 financial year, the cap amount is $180,000 and from 1 July 2017 the cap amount will be $100,000 or $300,000 over a three year period.
People aged under 65 years may be able to make non-concessional contributions of up to three times their non-concessional contributions cap for the year, over a three-year period. This is known as the ‘bring-forward’ option.
You may be eligible for the super co-contribution if all of the following apply:
you make an eligible personal super contribution during the income year into a complying super fund or RSA and don't claim a deduction for all of it
your total income (minus any allowable business deductions) for the income year is less than $51,021
10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of both
you are less than 71 years old at the end of the income year
you are not the holder of a temporary visa at any time during the income year, unless you are a New Zealand citizen or holder of a prescribed visa
You lodge your income tax return for the relevant income year.
Self Managed Super Funds
For those clients who want greater contril over their superannuation, Self Managed Superannuation Funds (SMSF) may be appropriate.