June 2009 Newsletter

Top ten problems with our super system, defending SMSF trustees, contribution survival guides, DIY super’s ten commandments

Welcome to the June edition of our SuperGuide newsletter, a free and independent source of superannuation information for consumers.

We’re entering another financial year and the biggest threat to the security of your super savings is not the volatile investment markets, but the government’s latest super review.

• SUPER REVIEW: Since the Budget announcements in May, the very experienced Senator Sherry has stepped into the role of Assistant Treasurer, handing over the responsbility of looking after the $1 trillion industry to MP Chris Bowen. Before Senator Sherry moved on however he appointed Jeremy Cooper (formerly of ASIC) to oversee the latest super review looking at the superannuation system. Unbelievably, the expert panel appointed to run the review, and the industry advisory group advising the goverment, has no consumer representation – none at all! Think about this for a moment: the super system exists solely to fund the retirement of Australians and the interests of fund members are not represented.
• THE SOAPBOX: Even more disturbing is the fact that neither the expert panel, nor the industry advisory group, has any SMSF trustee representation – even though SMSFs control 30% of all superannuation assets. In this month’s edition of SuperGuide, in THE SOAPBOX, I defend the decent SMSF trustees who are doing the right thing, and in many instances, doing a better job than the major players in the industry, despite the misinformation spread by vested interests within the broader super industry.
• TOP TEN SUPER PROBLEMS, AND HOW TO FIX THEM, And as I promised in last month’s edition of SuperGuide, I deliver you what I believe to be the top ten problems with our super system, and more importantly, how to fix these problems – food for thought for the super review’s expert panel.
You can find these articles, and the latest on the super contribution rules, DIY super, and Q and As from readers, by clicking on the links below.

I am very proud of SuperGuide, and I hope you find our newsletter and website helpful. If you like this newsletter and our website, then please pass on the newsletter to your friends and encourage them to sign up for SuperGuide newsletter. As consumers, we have more influence with decision-makers when we speak as a group.

Trish Power

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THE SOAPBOX: Defending decent SMSF trustees
Based on the bagging that DIY super trustees have received in the media recently from government and certain sectors of the superannuation industry, you may be thinking that taking control of your retirement savings via a self-managed super fund (SMSF) is akin to a criminal act.
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FEATURES
Top ten problems with our super system, and how we can fix them
In the May 2009 edition of SuperGuide, I promised you a list of what I believed to be the top ten problems with Australia’s super system. My motivation for promising this list was the federal government’s announcement of yet another review (details at bottom of this article) relating to the superannuation system, and the appointment of an advisory panel with no consumer representation or SMSF trustee representation.
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Super returns in the red, again
The investment managers and super funds have not yet signed off on the investment accounts for the 2008/2009 financial year (1 July 2008 to 30 June 2009), but based on interim figures, the returns on a typical superannuation account are in the red for a second year.
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HOW SUPER WORKS
Super concessional contributions: 2009/10 survival guide
Superannuation contributions can be divided into two types — concessional (before-tax) and non-concessional (after-tax). Each type of super contribution is subject to a contributions cap (see table below). A contributions cap sets a limit on the amount of contributions you can make in any one year. If you exceed the cap, your excess contributions are likely to be subject to penalty tax.
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For over-65s: Ten super tips when making contributions
Anyone under the age of 65 can make super contributions without having to satisfy a work test. If you’re aged 65 or over, however, you’re subject to additional rules when making super contributions. Here are ten tips to help you understand the super contribution rules for over-65s.
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Your 2009/10 guide to non-concessional (after-tax) contributions
Non-concessional contributions are more popularly known as after-tax contributions. You may even hear them called ‘undeducted’ contributions. Such contributions are subject to a contributions cap, which sets a limit on the amount of after-tax contributions that you can make in one year (1 July through to 30 June). If you exceed the cap, your excess contributions are likely to be subject to penalty tax.
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Cashing in on the co-contribution rules (2009/2010)
The Federal Government is giving away money to anyone who makes a non-concessional (after-tax) contribution to their super fund, and who earns less than $62,000 a year. Changes to the co-contribution rules, effective from July 2009, mean that anyone considering taking advantage of the co-contribution scheme for the 2009/2010 year needs to dot their ‘i’s and cross their ‘t’s to ensure their entitlements.
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DIY SUPER
Do you fit the profile of a ‘typical’ SMSF trustee?
The ATO releases statistics on SMSFs every few months, and the latest statistics (representing SMSF activity up to the end of March 2009) highlight some interesting observations that can be made about the current batch of SMSF trustees.
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Trish’s ten commandments of DIY super
In recent years, when presenting to investment forums on DIY super, I often use the term ‘ten commandments’ as a tool to help the audience grasp the major rules that apply to self-managed super funds (SMSFs). Here are what I consider to be the ten commandments of DIY super.
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Q&As
Upper limit on SG contributions
Q: Can you please advise the 2009/2010 cap on earnings for the maximum contributions base?
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Contributions caps relate to financial years, not calendar years
Q: I understand the three-year bring-forward rule that allows you to contribute up to $450,000 in after-tax contributions. My question is: What date does the second three-year period start? For example, if I contributed $450,000 on 1 Dec 2008, does that mean I can contribute another $450,000 after 1 July 2011 (or should it be after 1 Dec 2011)?
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Temporary pension relief is… temporary
Q: I wondered if a SMSF pension that was started at the relief rate of 2%, would it then have to increase to the 4% once the relief period expired, or would it remain at 2% because it was started at that rate?
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All content © Trish Power

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