August 2012 Newsletter

August 30, 2012

$1 million or $2 million retirement, SMSF fee hike, ATO hit list, making contributions, life insurance, Q&As and more

Welcome to our AUGUST 2012 SuperGuide newsletter, the second of two SuperGuide editions published for August 2012. The highlights of this month’s newsletter are:

  • CRUNCHING THE NUMBERS ON A $1M OR $2M RETIREMENT. We have updated and revamped two of our most popular features. Due to many reader requests, we have included figures catering for more modest returns in retirement (5%) in addition to the 7% figures. You can discover what a $1 million lump sum, or what a $2 million lump sum can give you as a single person, or a couple, and whether you retire at 55, or at 61 or 65, and whether you want the money to last until age 87 (average life expectancy) or age 100. In a separate updated article, I explain why $1 million generally won’t last forever, even though at least one reader has proved otherwise.
  • HOW MUCH SUPER IS ENOUGH, IN A LOW-RETURN ENVIRONMENT? What happens if you choose, during retirement, to invest your money in assets that deliver low returns? By investing your money on retirement at 5%, rather than 7%, you will need at least $80,000 more in savings (and potentially up to $150,000 more) on retirement to secure a ‘comfortable’ lifestyle of $55,000 a year for a couple, than if you invested in assets returning 7%. Due to overwhelming reader demand we have revamped our wealth articles to also include 5% returns.
  • NEW LAWS: IS YOUR SMSF DUE FOR A SUPER SERVICE? New rules are now in place for SMSFs forcing trustees to take special care when considering a fund’s investment strategy, and when valuing the assets of a SMSF. Read about the new rules and discover how you can help your SMSF operate within the super laws.
  • SMSF COMPLIANCE: ATO’S HIT LIST FOR 2012/2013 YEAR. Will your SMSF be targeted? Click on the link below.
  • SMSF WHACK! ANOTHER 11% INCREASE IN ATO SUPERVISORY LEVY. In the past 5 years, the ATO supervisory levy imposed on SMSFs has increased 400%. Find out what’s behind the latest fee hike, and where your money will be going.
  • SUPER FUNDS GAIN 1.1% FOR JULY 2012, AND SOME OPTIMISM RETURNS. Click on the link below to find out more.
  • WHO CAN MAKE TAX-DEDUCTIBLE SUPER CONTRIBUTIONS? If you’re self-employed or not employed or satisfy a special test, you can claim a tax deduction for your super contributions. We have received an unusually high number of emails requesting information on tax-deductible contributions. Click on the article link below, and check out our batch of Q&As on the topic.
  • LIFE INSURANCE AND SUPER: 10 THINGS YOU SHOULD KNOW. Life insurance is a hot topic at the moment with nearly every Australian receiving life insurance cover from their super funds, and SMSF trustees now required to consider taking up life insurance. Click on the link below.

COMING UP!

  • AGE PENSION CHANGES. The Age Pension rates will change in September and we will have all of the details in the SEPTEMBER 2012 newsletter, and of course the latest news and tips on super.

Thanks again for your support and interest in SuperGuide.

Trish Power

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August 2012 Newsletter Super Guide

THE SOAPBOX

New laws: Is your SMSF due for a super service?

Read this article to discover the new rules in place for SMSF trustees, and discover what you can do to ensure your SMSF operates within the super laws. Read more 

FEATURES

Crunching the numbers: a $1 million retirement

I am often asked the question ‘how much super is enough for a worry-free retirement?’, and we regularly update our special SuperGuide articles on this topic for our readers. In this article I’m answering the question: what does a $1 million retirement look like? This article forms part of a two-part feature ($1 million and $2 million retirements) for those readers who want a truly comfortable life in retirement. Read more

Crunching the numbers: a $2 million retirement

The majority of Australians will need nowhere near $2 million in today’s dollars to have a comfortable retirement, but a significant minority of Australians are planning for (or at least hoping for) such a retirement lifestyle. In this article, I will be doing the numbers for those wanting a particularly cushy retirement and who are aiming to have an enticing $2 million in retirement. I have chosen $2 million because the ASIC MoneySmart retirement planner calculator allows for lump sums of up to $2 million. Read more

Super funds gain 1.1% in July 2012, and some optimism returns

The median superannuation growth fund gained 1.1% in value for the month of July, due mainly to the gains associated with Australian shares and listed property trusts (REITs), according to rating company Chant West. Read more

Life insurance and super: 10 things you should know

One of the best deals in superannuation has only a slight connection to your life in retirement. Life insurance cover within super funds rarely makes the headlines but for many Australians they are getting cost-effective cover from their super funds. Read more

Who can make tax-deductible super contributions?

Q: I am self-employed and I have never made super contributions in my life. Am I eligible to make super contributions, and can I claim a tax deduction for those super contributions? Read more

SMSFs

SMSF compliance: ATO’s hit list for the 2012/2013 year

Each year, the ATO publishes a list of compliance areas that the regulator intends to target when reviewing SMSFs during the year. Read more

SMSF whack! Another 11% increase in ATO supervisory levy

Effective from the 2011/2012 year, the ATO supervisory levy for self-managed super funds has increased from $180 to $200. The levy hike is an 11% increase from the previous financial year, and a massive 400% increase from the ATO levy that was payable 5 years ago. Read more 

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August 2012 Newsletter Super Guide

Q&As (Making super contributions)

Concessional contributions: What form do I use to claim a tax deduction?

Q: I want to make a tax-deductible super contribution to my SMSF. I am trying to find the official form for claiming this type of deduction. Could you lead me to a link where I could find a generic S290-170 notice of intent to deduct? Read more

Tax-deductible contributions: Timing the start of pension is essential

Q: I put money into my SMSF in June 2011 from a capital gain. I wasn’t able to tell the fund at that time what it was for as my accountant hadn’t completed the figures so that notice was sent to them in April 2012. As I understood the rules, so long as the money was in the fund at June 2011, I could then withdraw any of it the following month (and did). I am over 60 and retired. I now have been told that the money not only had to be in the fund in the year the gain was made, but had to stay there until the fund actually received the Section 82AAT (1A) notice. Can you confirm? Read more

Tax-deductible super contributions: Claim no more than your income

Q: If I make a personal concessional payment of $25,000 (tax-deductible) and a personal $150,000 non-concessional (non-tax deductible) payment into my SMSF and my personal taxable income for 2012/2013 is $20,000, are there possible tax penalties because I’m claiming $5,000 more than my taxable income, that is, will $5,000 be added to my non-concessional amount thus making it $155,000? Read more

Tax-deductible super contributions: Meeting the 10% income test

Q: Since July 2009, salary sacrificed super contributions have counted towards the co-contribution income test. Was there a similar change made in relation to the income test that applies to concessional contributions when claiming tax-deductible contributions? My understanding is that the income test applicable for making tax deductible (member) contributions is that the member’s assessable income plus reportable fringe benefits from eligible employment must be less than 10% of their total assessable income from all sources. Is that still the case? Read more

REVAMPED WEALTH ARTICLES (investments at 5%, or 7%)

Retirement: Why can’t $1 million last forever?

If you live off the earnings only from your invested capital then your capital can indeed last ‘forever’. The dilemma facing all investors and retirees is balancing the desired lifestyle (and maintaining that lifestyle over 20 to 30 years) with protecting capital and potentially leaving some wealth behind for your children or other dependants. Read more

A comfortable retirement: How much super is enough?

So, the big question is: how much money do you really need for your retirement? Lifestyle is a very personal thing —luxury living for one person is a modest existence for someone else. I don’t intend to suggest the exact lifestyle you must choose for your retirement years but I can offer you some guidance on the amount of money you need if you want to cover your basic living costs and support a hobby or active social life. For example, do you expect to take frequent holidays and are you planning to enjoy regular glasses of wine or beer? Read more

Setting a retirement target: Living on more than $55,000 a year

The most popular question about superannuation and retirement planning is, without doubt: How much money is enough? A glib response to this question may be: Enough money for what? From the many times, though, that I’ve been asked this question, I know that when most Australians ask it, they really want to discover the answer to: How much money do I need to maintain (or improve) the lifestyle I currently have until the day I die? For some Australians, the question also includes: ‘And to leave enough money to help my family after I’ve gone?’. Read more

More Q&As

I’m retired. Can I make super contributions?

Q: If I have retired from work and later on inherit a reasonable sum of cash, can I make a non-concessional contribution into my superannuation fund? OR is that only permitted while I am working, regardless of my age? Read more

Does the Government’s co-contribution count towards my contributions cap?

Q: Does a co-contribution received after using up the total bring forward cap of $450,000 mean that an excess contribution has been made, or is the Government co-contribution excluded from the after-tax contribution cap? Read more

Co-contributions: Can I claim the tax-free bonus for the financial year that I retire?

Q: I’m aged 69 and I will retire in December 2012. Am I entitled to make a deposit into my super fund and receive the Government co-contribution for the 2012/2013 year? Read more
August 2012 Newsletter Super Guide