Superannuation for Beginners

Discussion in 'Superannuation, SMSF & Personal Insurance' started by skater, 14th Feb, 2022.

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  1. Perky29

    Perky29 Well-Known Member

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    I understand. Thanks for clarifying Terry.
     
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  2. RENI99

    RENI99 Well-Known Member

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    The concessional catchup rule applies as long as your total super balance as at 30th June in the prior year is below 500K.

    We have been able to bring forward one years concessional contributions using a contribution reserving strategy in our SMSF.

    We have also used Pay in advance of interest to reduce CGT (if you had other investment loans) If you are considering this you typically need to get it in place about March and your bank may have restrictions on the types of loans you can do this for.

    We would also likely sell property at the start of the financial year rather than near the end to delay having to pay the CGT to reduce any impact on cash flow.

    So you really need to be thinking ahead as to when you might be selling property and how best to minimise the CGT and potentially maximise contributions into Super through concessional, non concessional and Downsizing contributions. This is where financial planners/accountants working together can be very helpful. We always do a projection of our tax around March and then make decisions on what to do prior to 30th of June. And plan forward then next 1-2 years in considering whether we might be selling property so looking at whether fixing loans, leases etc.
     
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  3. RENI99

    RENI99 Well-Known Member

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    I understand its Zero as long as gains are from a superannuation pension account. During the Accumulation phase (before you convert to pension which might be over 60) that the earnings that are capital gains from an asset owned through your super for more than 12 months and then sold, the tax on the gain is 10%. You pay 15% on earnings (non CGT) in the accumulation phase.
     
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  4. sash

    sash Well-Known Member

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    Yes. But that is concessional IE you can deduct from income but pay 15% contributions tax.

    As for the bring back rule if you only put say 10k per year in the last 3 years. You can catch-up 15k each for 3 years so long as you are under 500kbin super.

    Get advice as this keeps changing
     
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  5. RENI99

    RENI99 Well-Known Member

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    There are restrictions based on your total super fund balance but as long as under 1.48M you can bring forward 3 times the NCC limit up-to aged 75. Plus if you sell a property that has been your main residence and you have owned it for at least 10 years you can each contribute 300K without any limits being applied. You have to transfer that money within 90 days of the sale and be over 60 (from 1st July 2022) - Refer ATO downsizing rule.
    So lots of opportunities if you have the cash from investments and low super balances to build it up but you need to get the timing and order right. Professional advice from both financial planner and accountant would be recommended.
    You can only transfer up-to the total super balance limit into pension mode but you can still enjoy the tax savings of the money that stays in accumulation mode.

    I am not sure that I would be aligned with the "sharemarket tanking" concern or would be putting it in conservative fund as hopefully you still have 25-30 years ahead and you would be looking for some growth and as long as you are getting dividends thats probably better than say cash rates and no growth and then having to draw down on capital.
    Mind you cash rates might be a lot better by then and sure you would normally reduce your risk profile when going from Accumulation into pension mode.
     
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  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    A taxpayer with a large CGT amounts should BEFORE 30 June consider their total available convcessional cap and consider tax benefits of making a concessional (tax deductible) contribution BEFORE 30 June of that same year.

    You may be susprised how many think they can constribute before that tax return is lodged. And others who think they can max out and be ineligible for catch ups, or who get notices wrong or who get their maths horridly wrong. Wise to estimate the ACTUAL CGT issue and what a draft tax position looks like,. then get advice concerning caps and calculation on merits.
     
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  7. Cousinit

    Cousinit Well-Known Member

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    What did you decide to do in the end Skater? Any update?
     
  8. Elives

    Elives Well-Known Member

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    what do you mean by this pension comment, i thought you had to use up most of your own funds first before even being eligible for the pension i thought it was like 150k in assets after that you weren't eligible
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    An ongoing payment from a superfund once a condition of release is met. You are thinking of the aged pension?
     
    Last edited: 29th Jun, 2022
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  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Absolutely incorrect. Think of super accounts like a jar of money. A person aged 60 could create a second jar with nothing in the first. Now jar2 can be invested without tax.
     
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  11. skater

    skater Well-Known Member

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    Well......we were going to sell the ex PPOR & I was going to chuck $300k into both mine & Hubby's super, but pulled the plug on the sale, so that never happened.
     
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  12. Cousinit

    Cousinit Well-Known Member

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    I'm not too much younger than you and I'm thinking a bit the same way. I don't have too many assets in superannuation for similar reasons ( I'm 56 ) and as I slow down I need to plan carefully otherwise I will be enduring the ravages of taxation.
     
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  13. MWI

    MWI Well-Known Member

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    @skater, it would be impossible to advise knowing what you wish to achieve in Super/SMSF first?
    Perhaps trying top down approach would be the right way to go, what do you wish to achieve from your Super and what would be the satisfactory $ amount in terms of balance and income you wish to derive, then see what asset classes you would invest into and work from there and see if this suits you both?
    The same way you built your passive incomes from investing outside of Super.
    Then you can see various ways from Super professionals how to go about it in your circumstances to achieve those figures as there are many many many ways, especially in your age brackets.
    You would need to work out whether the income you would derive from Super would be more beneficial to you in terms of 0% income, estate planning or even asset protection etc....but you need to be aware of Super rules and guidelines when drawing down these funds if they would suit your circumstances. Did you know based upon your age in pension stage you are required to draw down certain %?
    For example say you derive $80,000 each with your hubby from your outside investments and assuming they are in your names you will be taxed at personal income rates. Assuming you held these investments in Super/SMSF entity you would be taxed differently.
    In simple terms under Super you have two stages, accumulation and pension. In accumulation phase tax on income is 15% and around 10% for Capital Gains. In pension phase if your TBC (Transfer Balance Cap) is $1.7M tax on income is 0% including CG, anything above that is again taxed as accumulation stage.
    The issue is then how much do you wish and can build quickly in your Super/SMSF?
    Say I had no Super/SMSF and decide to start one with my spouse at similar ages to you. First aim would be to see how effectively can we build our Super/SMSF and to what $ amount. 2 below assumes two members you and spouse.
    $27K x 2 CC, another $27K x 2 CC in June (as Reserving Contribution Strategy [google its meaning its' like prepaying interest in advance one year] - can only be used one year then would need to prepay following year), $110K x 2 x 3 years NCC [as could use bring forward rule of 3 years]. So total so far is $768K. If you are eligible for downsizer you could in addition add $300K x 2 = $600K, making then total Super/SMSF of $1,368,000.00. Can add any spouses rollovers too if he has any.
    In addition if you have cash outside you can also lend the money into SMSF as LRBAs arrangements for investing. So as you can see there's no need to learn all and best ways how to go about Super/SMSF leave this to these specialists but instead decide if you would be better off owning investments under such circumstances and whether stringent rules under that environment would suit you both.
    This would be my advise knowing first what I you can build it to, how fast, and then see what to invest in.
    We have supplemented this entity in addition to our investments outside so you need to do risk/benefit analysis and see if this environment suits you. Do you wish to supplement OR build it as big as you can?
    This is not advise seek independent advise but understand first what you wish to achieve from it?
    By the way we had set up our SMSF in 1995 or 1996 and 100% investment decision making is controlled by us directly, such as direct IPs, private IPOs, direct share investments, etc...not by external Super funds (we are probably exception to most?)
    Hopefully this helps you?
     
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  14. MWI

    MWI Well-Known Member

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    Talk to @kierank about it. I believe he utilizes his SMSF income obtaining or refinancing.... depends on personal financial circumstances and negotiating skills with lenders too!
     
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  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Some lenders will take super income for servicing even though it is not taxable income.
    We got someone a loan to buy a new main residence where they were retired and had no income other than the pension from their super.
     
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  16. skater

    skater Well-Known Member

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    Thank you very much for the long reply, however we have not intention of starting a SMSF. Simplicity in old age is more important to me.
     
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  17. Cousinit

    Cousinit Well-Known Member

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    Fair enough. I thought you said that you were about 60 though, which is a long way from old age these days? You might live another 30-40 years if you have looked after yourself and have a bit of luck. I'm a bit of a fan of Noel Whittaker and just re-read one of his books on supperannuation. Also, I have a lot of my wealth in property, held in two separate trusts, and bugger all in super (shares etc) perhaps similar to you, as I have been in business most of my life. Now that I'm easing back a bit and in my mid 50's I'm looking to maximise my wealth in super and need to get some top advice. Reading Noel's books on superannuation has been a good start.

    All one needs now is to pull finger and look for a good planner! Preferably not someone straight out of uni or someone about to retire in a couple of years.
     
  18. MWI

    MWI Well-Known Member

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    I would seek planners that could show me if they 'walked the talk', basically can they show they invest in real life themselves in such a way rather than just in theory.
     
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  19. sash

    sash Well-Known Member

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    No such beast...let me know if you find one
     
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  20. skater

    skater Well-Known Member

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    Yes, you got the age right. And you're right, I might live another 30-40 years, but as I get older, I want things more simple.
     
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