Superannuation - Lessons Learned

Something to be aware of is that the tax accounting processes are very different for a Super that works through a 'Mastertrust' as opposed to one that works through a 'Wrap' structure.

In a Mastertrust the Tax is calculated at fund level and apportioned to the member through unit price.

In a Wrap the Tax is calculated at each individual member level and more accurately accounts for the correct Tax benefits for individual members.

Unfortunately what the public does not realise with regard to a Mastertrust is that the fund level accounting can actually penalise some investors and distribute some of the Tax benefits they would normally be due as an individual investor out to other members. In other words there is a danger of not receiving the full tax benefits of your portfolio due to the unitised accounting method and make you wonder....."Who stole my franking credits?"

Mastertrust based products are considered dinosaurs by the major private product providers, they have all moved to Wraps years ago. However most of the Industry Supers are still run through a Mastertrust.

The industry funds know that many Aussies are largely price driven and have based their whole campaign around being cheap. Unfortunately this is quite misleading and does not tell the whole story and there are plenty of other reasons why you need to think about far more than just fees when choosing your own pathway. Simple as "you get what you pay for".

 

How do you pay yourself as Director of your company?

 

I just pay myself a wage each week. But I don't pay myself super.

 

If it is a choice then, to answer your question:

Why should I put money in an account that I can't touch for another 30-40 years. What if I died tomorrow?​

What if you don't die tomorrow? Super is a low taxing environment to invest for the future. Someone wanting to retire early will need investments outside of super but mostly, people are planning to live beyond 60. Balanced investing inside or super and outside of super may allow you to retire sooner. The funds invested in super may go further in retirement also (after 60) because they are taxed lower. That's the only reason I would consider investing through super. I have a mix of investments inside of super and outside of super. Not advice.

 

Hi Alex, would you be able to provide an example of how this can occur and an analysis of the actual impact?

I have trouble believing it can equalise the fee differential given the size of the differences involved.

 

Got my Telstra dividend as an example.
Online statement shows Dividend payment, plus 30% franking credit, less 15% tax.

 

You may actually have breached tax law which imposes a obligation for minimum 9.5% super to be paid for all employees. That includes a working or non-working Director receiving remuneration. You may have a seriously accumulating contingent tax debt and not know it. Its not optional.

The super guarantee charge (SGC)

Ironically you and any other Director are personally liable for it - The ATO could penalise you personally so that they collect it to credit to your nominated fund.

 

The tax withheld isnt tax - Its withholding tax. If its a SMSF the fund claims the credit against the actual tax debt so it does get recovered at year end. Make sure the fund TFN is reported to the share registry so it does not happen again

 

I thought so.

 

Thanks for the info Paul. I will get onto my account about that.

 

I pay all my workers super on time

 

@Alex Straker any thoughts on best DIY SMSF platform, Esuper etc etc etc

 

@Redwing yep sure do pls PM me if you wish to discuss.

 

@jchan86 – any updates?

Bumping this thread as I'm in a similar situation in wanting to more proactively manage a super fund (that compounding / ripple effect in mind) and not wanting to delve into the SMSF option just yet

 

Nothing too exciting here in terms of my gameplan 2yrs on. Have kept it simple.
Maxed out $25k contributions cap through salary sacrifice yearly and removed all insurances within Superannuation.

Since my original post (13-Dec-2016) achieved an annualised return of 3.73% (15-Dec-2018); unfortunately the recent market has taken a battering, however this is great during accumulation phase (another 30+ years and looking at info re: sequence of returns, it's certainly best to experience these down years earlier on)... I will end up purchasing more "units" for my $contribution.

Between 13-Dec-2016 to 30-June-2018 annualised returns would have been 8.51% so I think everyone's super whom wasn't in cash had copped a beating over the past 3-4months which isn't surprising with most returns from YTD having been wiped out.

Have adjusted my mix to:
81% International Shares
11% Australian Shares

With the balance being a mix per the investment I've chosen being Cash / Property / Aus Fixed Interest / Int Fixed Interest / Other

In a discussion with an advisor, have kept it simple and remained with my existing superannuation fund and will wait till my balance reaches $250k+ as it's just not worth it in the meantime.

Currently, have been making accumulating incrementally into my share portfolio outside of Superannuation (Australian Equities). A mix of LIC's and several companies I accumulated over the last 2 years.

The below quote from @XBenX was a very simple way of viewing it...

 

It actually depends on how your accountant lists this payment.
I pay myself each week as an employee, and receive superanuation
I also receive company dividends, these do not require the superannuation component, this payment is also franked (I use the dividend to top up my loan servicing account, as my repayments exceed my actual wage )

 

Thanks for the update, I like simple too

Sounds like you're doing some impressive savings... retirement at 50 then?

I'm with QSuper who have a "self-managed" option where you can allocate up to 75% of the assets – unclear if that includes LICs but I intend on clarifying that on the phone on Monday.

You've inspired me to book in with a financial advisor, I think I might be doubling up on income / life insurance premiums...

 

I cant say if this is still the case, but when I looked into the self-managed QSuper accounts, their fees were much higher than the fees to remain in my existing part of QSuper.

 

Here's the thing people forget about super. You already have a bunch of money stuck in the superannuation environment anyway. It's yours. (And more will arrive in your super fund due to the compulsory employer contributions.) Thus you might as well put it to good use. This is a separate topic to the matter of whether or not you wish to salary sacrifice extra funds into it.