Non-concessional super contributions

all correct, although only applies if you hold assets directly in and SMSF or direct shares option.

Most super funds are pooled, provisioning for CGT along the way.
The problem with pooled funds — Passive Investing Australia

 

Thanks so much!

If I understood all of this correctly, people who were 37 or older at the time of the announcement (of increasing preservation age) were not affected at all by the new policy, e.g. they were still able to access super at the age of 55. So for someone who is 41, like myself, the chance that the Government changes will affect my preservation age (60) are extremely low.

 

Just another one Anne, have you considered adding non-concessional contributions to your super or do you think this is silly?

 

I am about to max out my partner super to 1.7mils. Also once that is done I am maxing out my own super fund so that by the time I meet the condition of release my super will also be 1.7mils or whatever the cap allowed at the time. I also have share portfolio outside of super.

 

At age 41 I would be focusing on investments outside super. And then look to top up super as you get closer to being able accessing it (or at least 50)
Take a look at the downsizing rules as that will allow you to put in 300K after selling a PPOR plus you have the bring forward rule and can now contribute to age 75.
Having a plan to say purchase an property as an investment that you will hold for minimum of 10 years but have it as your PPOR so it is at least partially CGT exempt (and utilise the 6 year rule) and sell when you hit 60 (or potentially 55) - you should be able to put in 600K plus into super or twice that as a couple.
Assuming you qualify for a loan and use the banks money to leverage - you should be able to increase your wealth more than just putting your after tax $$ into super.
There is still a risk that super rules will change and be less lucrative but hopefully not too much as the government still needs self funded retirees.

 

Not really - it's just the sum total of the number and frequency of the changes that helps me realise this is a purely political structure put in place for political reasons. Its very existence is a function of political circumstances. It remains politically expedient to not play with it too much for now and I agree that is unlikely to change too much but we all know political drivers change with the wind, particularly over a couple of decades, which is a political eternity.

What the politicians giveth, they can taketh away...

 

The tax savings are huge. A lot to give up on the unlikely chance of a negative change.

 

Well no tax is applies to $1.7M TBC anything above would attract 15% tax as rules have changed.

 

I agree. The other problem is that I'm planning on retiring much earlier than super preservation age. When I'm paying too much tax, my strategy in the past has always been to just borrow more money...

Once those two drivers have been met / maxxed out, I will probably (reluctantly) contribute something to super... but I'm still trying my hardest to avoid it!

 

I understand why people have concerns about the small likelihood that rule changes will have a major impact on their ability to access super. But you have to invert that - what is the chance that if you keep the money outside super you will lose it due to things like lawsuits, scammers etc. You can do all the discretionary trust setups in the world - and pay for them - but are you ever 100% sure you are protected from going bankrupt due to a libel case, tenant injuring themselves etc. etc. ? I know super isn't impenetrable, but it seems a lot harder to attack.

Admittedly I am a super fan boy. Given how many concessions there are for it I have no choice but to be. The amount of free money it can give you is crazy.

 

Yes. Currently only 1.7mils can be converted to pension. The remaining balance stays in accumulation account which pay 15% on earnings and 10% on capital gains. For those with high assets outside of super it is still worthwhile to have more than $1.7 mils in super though if their personal tax rate outside of super is higher than 15%

 

I'm in a similar position: planning to retire much earlier than preservation age, and in the highest tax bracket

I figure that eitherway I'm getting the money eventually, and contributing to super is a heck of a lower risk way of reducing tax than borrowing money to do it.

 

Taxation-free super and preservation age are not a match. Taxation-free super and being retired, and over 60 and converting your accumulation account to a retirement account are a match.

Nothing at all happens when you reach preservation age - you just have a new option at your disposal. I remember when I reached preservation age.... actually I don't, because nothing whatsoever changed. It was just another day.

Contribution types and asset purchases and sales are not a match either. You can't buy a share with only your non-concessional contributions - unless that's the only you have, which will not be the case if you've ever received an SG contribution, which you have.

Preservation age is just the age at which you can access your super if you retire.

You are paying your super fund probably a couple of grand a year in fees - get some benefit from them - ring them up and badger the call centre staff with your questions - they love it. Seriously. You try to put together everything you think you've worked out in this thread and I'll guarantee you'll get something wrong - and all the well-meaning links to ATO and MoneySmart won't give you the answers. And your questions need refinement. That's what these guys do for a living. Take advantage of it.

(Until recently I was employed by a retail superannuation provider, in a product role, and had spent 15 years in that business)

Call your provider.

 

I recently got free advice (as part of membership) from a ‘ highly skilled’ advisor and she gave me the wrong advice. I went and researched myself and asked her to double check and she came back confirmed that I was correct. Would have costed $60k or so in tax saved had I taken her advice.

But I agree it is worth it to get advice.

 

Quite possibly a second opinion too.

 

Incorrect.

A member may have one accumulation account and more than one pension accounts. The proportion of accumulation balances v total balances will determine the non-exempt income proportion (ie the pension proportion based on avg daily balances will be the exempt element) and be subject to tax based on an ctuarial calculation. Contributions must never be added to a existing pension to avoid the breach of SIS Reg 1.04 which results in a non-complyinmg pension. That is then assessable to the member.

When ALL of the fund income for all of the days of the year is solely pension account balances then investment income incl gains is fully exempt.

 

Preservation is based on the date of birth if born before 1 July 1964. It may have ranged between 55 and 59 if born before 1 July 1964

A person aged under 60 taking a pension does face tax. Preservation merely allows a condition of release. ie Subnject to the 10% maximum etc. That pension is a transition to retirement pension until the member reaches age 60 and also ceases employment. TRIS pensions are non-commutable which means you cant stop it and start a exempt pension at age 60. You must meet that further condition of release. Several years ago all TRIS pensions were exempt but that ceased. A offset applies to concessionally tax a TRIS pension prior to age 60 unless the pension is from a untaxed fund and then it varies somewhat.
From age 60 a pension is exempt income. And the % of the fund based on pension will be exempt from tax on earnings.

 

I'm not talking financial advisor level of "advice" - all the retail (and I assume, industry) funds keep well-trained call centre staff on hand, and publish lots of their own material, specifically to deal with the OP's questions, which are fairly standard.

The risk the OP runs is in asking an evolving set of questions here, as they think they're learning more, answered by anonymous people on a bulletin board who may or may not actually understand superannuation in all its glorious complicated detail, is that they misunderstand something along the way, and phrase further questions based on that misunderstanding and end up not in Kansas any more, and make bad decisions as a result.

The OP clearly has some misunderstanding of preservation age and tax on super accounts - they're not necessarily related. And I think they're aware of this and are trying to sort it out in their head.

My point is that you can do all this, for free, via your super fund's existing information channels, and get accurate information which will allow you to get everything straight in your head and make good decisions.

They want you to call. They want you to understand your super account. They want to help. Trust me. I worked "there" for a long time. Because they know if you get an "a ha!" moment about super in the conversation with them, you'll be more likely to stay.

All this nonsense in the press about super funds needing to try harder on the communications front is just that - nonsense - they ALL have a gold mine of information which they would love to get their account holders abreast of, should any of them ever take their fingers out of their ears and stop going "la la la la it's too hard and I don't understand it."

That the OP is here at all asking questions indicates that they're proactive in seeking information. Good. So start with a conversation with your super fund. Let that sink in, understand it, then go back with more questions and at the same time start looking outwards for your own information.

If the OP is still reading - tax on contributions and earnings is levied depending upon account type, not age or preservation age or anything else. Those factors come into play to allow you to have the type of account which pays no tax.

And as if by magic, First Links published an article today making this exact point.

Too many retirees miss out on this valuable super fund benefit

I'm one of those retirees "missing" the valuable benefit, BTW, but I have my reasons.

 

This is my point immediately above ... people are trying to be helpful and answer the questions being asked, but can give out incorrect, or incomplete, information along the way because they're not experts in super - which is very complicated.

You're correct as you know in the detail in both your posts, but what if you hadn't happened along at this particular point in time and felt like steering the OP straight?

That's the OP's risk by pursuing super information in an investment forum. They ain't the same thing. At all.

 

Yes there is a need to educate and explain and provide general information which helps but there are so many details it pays to seek very specific guidance even from a fund or adviser etc. A simple thing like paperwork may be required. Even a simple matter like super contribution deductions have a process which can easily render the deduction not available.