Q & A SPECIAL: Contribution strategies, SMSFs, retirement planning, accessing super early, tax-free super
Welcome to a special Q & A edition of SuperGuide, a free and independent source of superannuation information for consumers.
This special edition contains 23 Q & As covering the following topics:
- SUPER BASICS (2 questions). Superannuation Guarantee: checking up on your employer, what happens to your SG when your employer goes broke
- BOOST YOUR SUPER (4 questions). Reducing CGT via super contributions, how to claim tax deductions, making contributions when turning 50, or when turning 65
- DIY SUPER (6 questions). Useful books, SMSF pensions, investments in related companies, CGT calculations, selling property investment
- RETIREMENT PLANNING (3 questions). Rules for over-65s, taking benefits under the age of 60, retiring to pay debts
- ACCESSING SUPER (2 questions). No access for business debts, automatic access at age 65
- SUPER & TAX (6 questions) Four must-knows about super’s tax rules, case study, SATO rules, estate planning, looking after your dependants
You can access these Q & As by clicking on the links at the bottom of this email. You can find many more Q & As via our website.
Due to the interesting and bizarre developments associated with the 2010 Federal Election, we are holding off from our promised commentary on the policies that the political parties forgot to mention during the election campaign – fingers crossed we will have a workable Government by next edition.
INVESTMENT SPECIAL. Coinciding with the issue of millions of fund member statements by super funds, our SEPTEMBER 2010 edition will focus on investment performance, asset allocation and SMSF investment strategies. As a bonus, I will be sharing my own secret weapon when accumulating wealth – TARGET RETURNS. I believe the super fund industry has the investment game the wrong way up when building wealth for super fund members – but you’ll have to wait until our SEPTEMBER 2010 edition to find out why. The SEPTEMBER 2010 edition will also cover the latest Age Pension increases taking effect from 20 September 2010.
Note: You can click on the links below or you can access the newsletter links directly via the SuperGuide website. Click here if you would like to access the special Q and A special edition of the SuperGuide newsletter page via the website.
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Super for beginners, part 18: My employer hasn’t paid my SG. What can I do?
Q: What steps can I take to ensure my employer contributes all I’m owed to my super fund? I’m a non-resident who has just been refused a visa to stay longer in the country. I have been asking my employer for the last 3-4 months about putting my super contributions into my super fund, as they have not done so since I started working there about 1.5 years ago.
Super for beginners, part 19: My employer has gone broke. What happens to my SG entitlements?
Q: My employer has suddenly ceased trading and despite appearing on weekly payslips, I and fellow employees find no super contributions have been made, in my case for over 12 months. What, if any recourse, do we have?
BOOST YOUR SUPER
Capital gains: Reducing tax via super contributions
Q: I have a self-managed super fund (SMSF) and I also have two investment properties in my personal name. When I sell the properties, I will be required to pay capital gains tax. Can this capital gains tax be offset by a contribution to the SMSF which would be tax-deductible? Would there be a 15% contributions tax?
Tax-deductible super contributions: Claiming no more than your income
Q: If I make a personal concessional payment of $50,000 (tax-deductible) and a personal $150,000 non-concessional (non-tax deductible) payment into my SMSF and my personal taxable income for 2010/2011 is $40,000, are there possible tax penalties because I’m claiming $10,000 more than my taxable income, that $10,000 is added to my non-concessional amount thus making it $160,000.
Super contributions: Turning 50 part-way through the year
Q: If an individual turns 50 years of age during the financial year, could the increased concessional contributions cap for over-50s apply, or would that individual need to be 50 for the full financial year?
Super contributions: Turning 65 part-way through the year
Q: I turned 64 in January 2010. So I am 64 years of age for a large part of the 2010/2011 financial year. But of course I will turn 65 during the 2010/2011 financial year, that is, in January 2011. My understanding is that because I am under 65 for part of the 2010/2011 financial year then I can exercise the bring forward provisions and make non-concessional contributions up to $450,000 before I turn 65, if I choose to do so. Is this correct?
SMSFs: What books are available to help run my fund?
Q: I manage a SMSF for my wife Jenny and myself and, this year I am attempting to prepare our tax return myself using MySF. Although I am no dunderhead, I’m finding many aspects of taxation to be quite difficult to understand. Terms such as “Tax free / taxable component; Restricted, Preserved”.
SMSF pensions: Commuting to acccumulation phase
Q: My SMSF super is % in account based pension began in 2009 and part % in accumulation. I am considering changing all back to accumulation and I think this is called an internal rollover? Can you please tell me whether this is classed as a commutation of the pension?
SMSF investment: Can I invest my super money in my own company?
Q: Can I set up a self managed super fund (SMSF) and invest the funds in a company of which I am the sole director? If yes, will the earnings of the super fund be tax free and would my drawings from the fund be tax free? I am 64 years old.
SMSF pensions: Watch out for a surprise tax bill on fund assets
Q: My question is about taxation within super when a member dies. We are two members in the one SMSF, both drawing pensions. We have nominated each other as reversionary beneficiaries and benefits are to be paid to our legal estate in case the nominated reversionary beneficiary dies before the pension member.
CGT calculations for SMSFs
Q: If I purchased a rental property in my SMSF for say $200,000 five years ago and the house is now valued at $300,000 in the SMSF what will be the capital base for the calculation of future capital gains tax (CGT) if I transfer the house out of the fund? Will it be the original $200,000 or the $300,000? I am over 60 years and can transfer the property out of super tax-free.
SMSFs: Selling a property asset
Q: If my self-managed super fund (SMSF) owns an investment property, and the SMSF later sells the property, what is the amount of capital gain tax payable by the SMSF?
Should I retire? I’m unemployed and have debt.
Q: I’m 59 years of age and in March I lost my job. I have since been trying to find work but due to my age I’m finding it excessively hard. After much discussion with my wife we have decided that the best option would be for me to retire. As she is working and earns a decent wage, I am unable to receive government assistance, but with our mortgage and expenses her wage is just not enough.
What are the super and retirement rules for over-65s?
Q: My wife (age 63) and myself (age 65) have a small business. I was told by an organisation that at 65 or over I could put money into super, pay 15% tax on the way in and then draw it out when I wished and pay no tax. In fact I have been told to pay myself $30,000 or less and “launder” the rest of my income through my super fund. My accountant has told me that she thinks I have to set up a pension scheme.
Retirement: Taking benefits before the age of 60
When you retire early, you’re going to have to make a few decisions. The tax implications of your retiring before the age of 60 can depend on whether you take your super as a lump sum and/or income stream. Are you taking your super as a lump sum, an income stream or a combination of both?
Accessing super early: Not for business debts
Q: I am in partnership in a franchise business that needs some financial input at this time. We have been struggling since the beginning of the recent financial crisis, and have fallen behind on rent and we are just managing to keep up with service providers. I would like to withdraw my superannuation to invest into the business.
Age 65: Accessing super is a right
Q: I am female and I will be 66 in a few weeks. My husband died in Mexico and my savings of $9,000 were used up to bring him home and funeral expenses. Since then I have been trying to save the money again but to no avail. I need urgent dental, optical treatment and since I haven’t been able to save it I have not been able to do this for three years.
SUPER AND TAX
Super for beginners, part 16: Tax-free twice
When you reach 60 and start a retirement income stream you get two dollops of tax-free super. If you’re aged 60 years or over, any lump sum or income stream benefits you receive from a taxed super fund (90% of all super benefits) are tax-free. Further, fund earnings on assets in pension phase are exempt from tax – taking an income stream means no tax on fund earnings.
Super for beginners, part 17: Four must-knows about super’s tax rules
If it were not for tax, superannuation wouldn’t exist. You would simply invest in your own name. Superannuation is taxed at lower rates to encourage people to lock their money away for retirement. Here’s the short story on the tax incentives surrounding superannuation.
I’m 59 and I have $180,000 in super. Will my super be taxed?
Q: I’ve just turned 59, and I’m thinking of retiring before I turn 60. I would like to know whether I would have to pay tax on my superannuation. I know that after I turn 60, it’s tax-free, so my inquiry is regarding the period till I turn 60. I have been employed by several private firms since I first belonged to a super fund in 1989.
No tax in retirement because you SATO
The superannuation tax rules are not the only tax benefits that you can take advantage of in retirement. If you are aged 60 or over, your superannuation benefit from a taxed source is not included as part of your assessable income. Most Australians receive super benefits from a taxed source, unless you’re a member of one of the older public sector super funds.
Estate planning: Dear Dad, tax for everything
If you plan to leave your super to your adult children when you die, your death benefit may be hit with tax, even though you would have received that benefit tax-free (if aged 60 or over) while you were alive. The reason for this inconsistency is that death benefits paid to non-dependants, such as independent adult children, are subject to a special ‘death tax’.
Estate planning: Beware the dastardly death tax
Although superannuation death benefits are tax-free when paid to dependants, a “death tax” continues to apply when super monies are paid to non-dependants. Any of your children aged 18 or over, who can’t prove they were dependent on you financially, or can’t prove they have an interdependent relationship with you, are deemed not to be “dependants” under the tax laws, even though they are a dependant under the super laws. What this means is that they can still receive a death benefit from your super fund or estate, but the benefit is taxed.