Why put more in Super, can someone explain to me?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Liarliar, 27th Apr, 2017.

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  1. Liarliar

    Liarliar Well-Known Member

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    Listening to 2ue Radio the other day on their Financial segment a caller rang in and asked the advisor how much time they have to top up their Superanuation .

    Apparently they had 1.6 million in there which apparently is the limit .

    Anyone can someone please explain to me , and im only a poor uneducated Public Servant on 48k a year so please be gentle with me and explain to me what benefits it has to put ALL that money into Super and not property .

    Now wouldnt that caller be paying 15% on the money when they went to top it up?
    They said to the Radio financial advisor they were going to quickly put in 100k , im thinking they would pay 15k in tax ?

    My question is there must be a reason these people are putting into so much into Super and not property ??
     
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  2. Terry_w

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

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    Super is taxed at 15% whereas a person may be taxed at almost 50%. The earnings may also be tax free at some point in the future too.

    Have you done the sums on compounding to see the effect.

    E. Double $1 20 times and you get just over $1mil.

    But take 30% tax out of the earnings and that $1 would only end up being about $40k after being g double 20 times.
     
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  3. Hodor

    Hodor Well-Known Member

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    My understanding is $1.6m is the limit when switching to tax free pension mode (or whatever it is called). Any excess must be withdrawn as a lump sum (can be put into an accumulation account at 15% tax). Still much better compounding in a low tax super account.
     
  4. Tonibell

    Tonibell Well-Known Member

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    Super is just a vehicle for reducing taxation. It has special taxation rules for both contributions and earnings.

    The funds can still be invested in property if that is what they chose.

    The benefits for an employee on $48K are not going to be there in most cases.
     
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Unless $48k is only salary and doesn't take into account the $millions stashed away in other assets.
     
  6. Tonibell

    Tonibell Well-Known Member

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    I was going to try to cover that and a few other scenarios - but "most" was an easier way of putting it.
     
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  7. Cactus

    Cactus Well-Known Member

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    My dad makes tax free money from investments in super as he is in pension phase.

    There's a good reason for you.
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    That's the best reasons isn't it?
     
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  9. marty998

    marty998 Well-Known Member

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    You are allowed to put in a $100k non-concessional contribution per year. This is NOT taxed on the way in, because it comes from after tax money.

    The concessional limit is 30/35k (depending on age) reducing to 25 next year. This is the pretax limit (your 9.5% + any salary sacrifice) and it's these contributions that people pay 15% tax on within super.
     
    Last edited: 27th Apr, 2017
  10. kierank

    kierank Well-Known Member

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    Up until 30 June this year, I believe it is $180k and one can contribute 3 years in one hit..

    That's $540k if you have the cask or assets.

    To me, one of the biggest benefit of Super is that it is protected from creditors, a big plus if you own your business.
     
  11. Greyghost

    Greyghost Well-Known Member

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    Undeclared overseas property :)
     
  12. Marg4000

    Marg4000 Well-Known Member

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    For a start, there is no excuse to be uneducated. Get in touch with your superannuation fund, you will almost certainly find they hold seminars to explain everything. Go along and get your questions answered. And if by chance your fund doesn't, check out other funds, they will probably be happy for you to attend.


    How do you know they don't own property or other assets? They may well have shares plus properties outside of their superannuation account.

    Superannuation is a holding structure and may well include direct property and share investments.
    Marg
     
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  13. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Massive tax savings but on 48k its debatable whether it is worth it?
     
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  14. Chris Au

    Chris Au Well-Known Member

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    It could also depend on the age of the person - if they are near to pension age then they will be able to see the rewards of their super investments. Talking with younger people, super and retirement seem 'so far away....'
     
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  15. Username86

    Username86 Well-Known Member

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    Especially if you want to retire before retirement age. Who knows what the retirement age will be in 30 years time.
     
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  16. Scott No Mates

    Scott No Mates Well-Known Member

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    There is no retirement age only an age for eligibility to to pension and to access your super tax free.

    The pension age has been changed (once?) in the entire time that it has been available.

    Super has been compulsory for less than 30 years but the rules governing it have changed countless times and will continue to change.

    The caps are seen as a way to reduce how much leakage the is from the tax system by way of untaxed benefits - the cap restricting the untaxed portion to only $1.6m per person and 15% above that amount. There is no cap on how much you can have.

    Structure it correctly and use the franking credits on the taxed income/dividends & still pay effectively very little tax.
     
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  17. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Generally a well managed Super account can out perform property if you put it in one of the riskier classes at the beginning when you are young and happy to ride the waves a bit.

    When you have a nice nest egg in super by topping up and the compulsory Super you can look at converting it to a Self Manager Super Fund (SMSF) then you can control it and buy all the property you like in it. The benefit of your super fund holding property is that it can still borrow to buy property but if the Super fund sells the property the profits are taxed around 15% depending on the amount of time you have held the property and your age.

    You can use your Super fund quite effectively as a young person. I'm 40 something (cough) and I have a SMSF and actively use it as a tax effective tool to increase my wealth.

    Read up on
    - low/mid income govt matching for voluntary contributions Super co-contribution you could get $500 a year from the government extra. Doesn't sound like much? It's free and it compounds. Win win
    - and all the other fact sheets in here Super
     
  18. Redwing

    Redwing Well-Known Member

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    Burden for retirees: Monitoring $1.6 million transfer balance cap

    Effective from 1 July 2017, for every Australian, a cap of $1.6 million will be imposed on the amount of super that can be transferred into pension phase, and effectively force Australians to remove super benefits from pension phase if a pension account balance exceeds this amount as at 1 July 2017.

    And

    Super changes (July 2017): Planning ahead for the 2017/2018 year

    Radical and substantial superannuation changes take effect from 1 July 2017: have you investigated how the super changes will affect your superannuation and retirement plans?

    A summary of the superannuation changes is set out below. You can also read more detail on each super change by clicking through to supporting articles. If you are seeking background information on why and how these superannuation changes came about, see the section at the end of this article.
     
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  19. MTR

    MTR Well-Known Member

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    I use SMSF in part as a tax strategy at the end of each financial year, don't ask me too many questions as I leave this with my accountant to sort out.

    MTR:)