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Self Mis -Managed Super Funds
Presented by Lincoln Frost Wealth Adviser
This information was prepared by Securitor Financial Group Ltd, ABN 48 009 189 495 AFSL & Australian Credit Licence (ACL) 240687 (Securitor) and is current as at March 2013.
Get personalised advice. Material contained in this presentation is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
This presentation contains general information only and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.
All case studies and examples used in this presentation are for illustrative purposes only and nothing in this presentation should be construed as an indication or prediction of future performance or results. Any taxation position described in
this presentation should be used as a guide only and is not tax advice. You should consult a registered tax agent for specific tax advice on your circumstances.
As the rules associated with the super and pension regimes are complex and subject to change and as the opportunities and effects differ based on your personal circumstances, you should seek personalised advice from a financial adviser
before making any financial decision in relation to any matters discussed in this presentation.
General Advice Disclaimer
• Superannuation overview
• Contributing to super; contribution types and limits
• Investment options
• What we see with Barristers
• Debt reduction versus super contributions
• Self Managed Super Funds – what we see
• Self Managed Super Funds – what we do
What we will cover today
• Superannuation system – concessional environment
• Government initiative – people to self fund
Investment environments – where should you invest?
Superannuation overview
Individual Company Superannuation Pension (from age 55)
Tax rate (income) Marginal tax rateUp to 49% 30% 15% 0%
Tax rate (capital gain)
Under 12 months – treated as
incomeOver 12 months –
50% discount
Treated as incomeUnder 12 months – treated as incomeOver 12 months –
33% discount0%
• Concessional:• Personal deductible (self employed) • Employer contributions (including salary sacrifice)
• Non-concessional:• Personal contributions not claimed as a tax deduction• Spouse contributions• Three year bring forward rule
Limits
Contribution types & limits
Financial year Concessional contributions Non-concessional contributions
2013/ 2014 $25,000 If 60yrs and over $35,000 $150,000
2014/ 2015 $30,000 If 50yrs and over $35,000 $180,000
Example: Income $180k-300k, FY15, Debt levy 2%, Medicare levy 2%
Contribute to super – reduce your tax
$35,000 earnings
Tax (49%)$17,150
Individual$17,850
Tax (15%)$5,250
Super Fund$29,750
Annual tax savings Savings over 5 years
$11,900 $59,500
• Income threshold $300,000• Regular 15% tax levied by super fund• Additional 15% applied to lesser of:
• Income above $300,000; and• Amount of contribution made
• Additional 15% on tax levied by ATO after ITR completed• Paid by individual (recoverable from fund)
Contributions tax for higher incomes
Example: $400,000 income, super contribution of $20,000Net contribution to fund: $17,000Excess tax: 15% x lesser of $100,000 and $20,000Excess tax = $3,000
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Global l
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6.2
7.5
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Before and aft er tax returns (10 years to december 2013)
Gross return After Tax Lowest MTR After Tax Highest MTR Superannuation
CPI2.8
Franking Credits – a little bonusExample: $15,000 of Telstra shares, $700 fully franked dividend
Franking Credits
Tax Rate 49% 15% 0%
Dividend yield 4.67% 4.67% 4.67%
Grossed up dividend $1,000 $1,000 $1,000
Gross tax payable $490 $150 $0
Franking credit rebate
$300 $300 $300
Tax payable $190 Refund $150 Refund $300
After tax yield 3.40% 5.67% 6.67%
Younger Barristers• Very little focus on super contributions in early years• What fund to choose, which investment options to select• Debt reduction preference to super contributions
Older Barristers• In many cases balances under $200,000 in mid 50’s • No clear investment strategy• Uncertainty as to amount of super that is required to support
retirement lifestyle• Uncertainty as to the appropriate mix of investments
approaching retirement
What we see with Barristers
• Look at goals based strategies
• Educate on cash flow, super, debt
• Look at whole picture
• Don’t aim to restrict lifestyle
• Provide clarity on what is possible and what isn’t
What we do with Barristers
• Mathematical versus emotional
• Debt needs over time – house upgrade, renovations etc
• It’s about balance
Put money toward your mortgage or super??
What we do with Barristers
What we do with Barristers
• 1-4 members
• All members are trustees or directors of trustee company
• Trustees are responsible for complying with superannuation
law
• Ability to operate to the full extent of superannuation law
• Sole purpose
Self Managed Super Fund
Do you need an SMSF?
What I want to do Available through personal super products
Available through SMSF
Trade direct shares Yes Yes
Access other investments: ETF, hybrids, listed income notes Yes Yes
Have control over my investments Yes Yes
Own insurance with whichever insurer I want Yes Yes
Purchase bank deposits Yes Yes
Purchase real property Not directly Yes
Purchase other non-typical investments; wine/ art/ collectables
No Yes
• Too much money in cash
• Overweight allocation to Australian shares – banks, mining
• No documented investment strategy/ pro forms strategy from
accountant
• Accountants advice seen as sufficient
• No documented insurance strategy
• SMSF not required in many cases
• TTR Pension strategies underutilised
SMSF – What we see
• Review investment strategy
• Understand retirement needs
• Model contribution strategy needed to hit retirement goal
• Diversify investments – match to risk tolerance
• Document insurance strategy for members
• Track progress regularly and make changes as needed!! – Not set
and forget
• Advise on legislative amendments
SMSF – What to do
• The best investment you can make is to seek advice!
• A good financial adviser will work through each stage of the financial planning process with you, making sure you have a clear understanding of each stage and that you are comfortable with any recommendations they make.
• Their advice will be tailored specifically to your individual needs, circumstances and financial objectives.
Your Best Investment
ODYSSEY
Self Mis -Managed Super Funds
Presented by Lincoln Frost Wealth Adviser