Superannuation for Beginners

I've not worked for anyone for a very long time. I have next to nothing in Super, and Hubby doesn't like Super. Being self employed for many years, we didn't have any, and so it was later on, that he actually started to work and accumulate, so he doesn't have much, but the truth is that he doesn't really know a lot about it either.

During the working years, we were busy spending the money on investments, working towards being self funded through retirement, and we've done an OK job with what was available. Not super rich, but never set out to be, but comfortable enough that I could pull Hubby out of work at 45 with enough income to live on, and have still managed to grow investments during this time.

I'm starting to realise that it is something that I should maybe look at before it's too late, and understand that it's been left to last minute.

So, please help me to understand some of the basics before I go running around and seeking information from the wrong people. Please remember that I have NO KNOWLEDGE of Super other than you can draw an income from it tax free once retired.

If I decide to go down this path, I need to understand it enough to then teach Hubby, who just closes off whenever Super is mentioned.

The first thing that I'd like to understand is, what is the concessional cap, and the non concessional cap. Please talk like I'm five years old.

 

a concessional cap is the amount you and your employer can put into super and claim a deduction for. This is currently $27,500 per year.

The non-concessional cap is the amount you can put into super in addition to this, but a deduction is not available. This is currently $110,000 per year. But there is a bring forward rule where you could potentially put in 3 years worth in one year.

 

Super is just a structure - its a form of trust.

 

If you put 27k as a lump sum into your super does this reduce your taxable income by 27k?

When people say you can draw on it tax free - is this the income/profit/dividends made will be tax free?

 

I put some money in super.
Am not happy or unhappy about it
It's very much also about which Super organisation you use.
Also I lost money from super. Eaten by companies who charged 'fees'.
Gather all your old super into one fund only.
(Industry Supers tend to charge the least in fees)
You will pay less fees.
Skater, I would start by going to a website which can find your lost super, from all the jobs you did have ages ago.
See if you have any money in there first of all.
This may take you a day or so of phone calls so be patient with yourself.
I always find when doing tasks like this its best to approach it from a cake first position.
1. Get Cake. or favourite fruit or foot bath etc (you get the idea )
2 Get coffee.
3. Pick up the phone , or internet, or ring old employers or their accountants.
4. Reward yourself!
I did all this while I was at home with a broken leg....
I hope this isn't too much information!
I hope this helps

 

Yes you could potentially put in up to $27k and claim a deduction. But you have to make sure you contribution and your employer's contribution is less than this.

Someone on $200,000 might be getting an employer contribution of $20,000 put in so they could put in another $7k and claim a deduction and save 47% of $7k with it being taxed at 15% on the way into the fund. Overall they are better off.

This could be a good strategy especially as they are approaching 60 as they can potentially get it out again soonish. but it is something that financial advice should be sought for.

the income inside a fund is taxed at 15%, capital gains 10%. But when a pension is being drawn this could be 0%.

 

@skater, it's simple in concept but then it isn't necessarily in application.

So maybe start here with some info sessions to read or watch at your own pace.

Super Education & Webinars | Your Questions Answered | AustralianSuper

 

Very true. My SMSF is another vehicle for me to own more property and reduce my income tax burden as well as my land tax.

 

Hmm, as this thread is about @skater I wondered how long it would take to drift towards not being about her questions.

It didn't take very long at all.

 

Try to stick with non profit industry super funds. They tend to do overall better than retail funds.

Once decided. Chose a well performing fund. Example Very large MLC is more expensive than QSuper and returns only 7.81% per annum opposed to Qsupers 8.44%. Some industry funds like AustralianSuper, Unisuper returned even more.

 

Why do you feel like you need to have super? You're doing alright with what you are currently doing.

 

Can you beat the tax benefits of super?

 

I found Noel Whitakers book - Superannuation Made simple useful - you can buy as an ebook - Superannuation Made Simple 3rd Edition 2021-2022 Just keep in mind that the rules keep changing so hard for the books to keep up.
This is also a useful summary of the caps -> Superannuation cap

Super is a structure to hold investments that you pay minimal tax on once you reach the age you can access the money - for example if you create a pension from it then all the earnings in the pension account and then pension you receive is all tax free. And you can't access the money until you reach that age (generally speaking). Because of the generous taxation rules the government puts limits on how much you can contribute to Super through the Concessional (before tax - with 15% taxed in super) and Non Concessional (after tax contributions) Limits.
Compared with investments that are outside super (so shares/real estate) where the earnings are taxed at your marginal rate. And the government places no limits on this.

 

Weeelll, maybe if a person has $1.7m in super and is over 65, they can draw down a pension of $85k tax free which is the equivalent of a wager earner on $115k pa could be a good enough reason.

 

Tax is not the only consideration

 

No it isn't. Given the scenario outlined by @skater and her circumstances I am curious what other considerations you think are important?

 

estate planning is the main one.

 

@skater, I was lucky to be first exposed to Super in 1977, on my first working day. I was assigned to a project that was developing a superannuation accounting system. I loved the whole concept of Super.

Over the last 45 years, the rules have changed, I have made mistakes but I have learnt a lot.

When I retired in 2010, I thought I knew all that I needed to know.

Now, after 11+ years in retirement, I am still learning about the magic of Super.

To me, it is a bit like parachuting. Unless one has done the full journey, I doubt anyone has a full understanding of it.

I am in my mid-60s. I am looking forward to hopefully at least another 35 years of the journey.

Please don’t take notice of me - listen to those in the hanger or still aboard the plane

 

Asset protection is another

 

I assume most here know asset protection and estate planning is fundamental whether in super or not…. Just saying