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Retirement Planning and Superannuation Rowan Fielke - Director Thornton Group.

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Presentation on theme: "Retirement Planning and Superannuation Rowan Fielke - Director Thornton Group."— Presentation transcript:

1 Retirement Planning and Superannuation Rowan Fielke - Director Thornton Group

2 This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034. This information was produced as an information service and without assuming a duty of care. This information contains general information only. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice. This presentation does not take into account any persons particular objectives, needs or full financial situation. Before making a decision relating to this presentation a persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk. Be sure that your adviser is Authorized Representative of a current Australian Financial Services License. Further to this make sure that your adviser is authorized to provide advice in the financial product groups or services that are contained and referenced to in this report. The information in this presentation is based on our interpretation of relevant laws as at 22 October 2009 and is subject to change. Disclaimer

3 Agenda 1. Structuring & Tax Education 2. Self Managed Superannuation Funds 3. Key Benefits of Super 4. Contributions and Tax 5. Investment Choices 6. Estate Planning 7. Pension Planning 8. Case Study 9. Centrelink 10. Who is Thornton Group? 11. Questions?

4 Structuring & Tax Education Personal Tax Scales 2009/2010 * plus Medicare Levy Any net capital gain is discounted by 50% if held greater than 12 months (pre 1985 CGT) Taxable IncomeTax Rate $0 - $6,0000% $6,001 - $35,00015% $35,001 - $80,00030% $80,001-$180,00038% > $180,00145%

5 Structuring & Tax Education Company & Trust Tax Rates for 2009/2010 * If no beneficiary, the trustee is taxed @ 46.5% ; ^ marginal tax rate of the beneficiary Structuring & Tax Education EntityTax Rate * Company30% Trusts - distributed to company30% - distributed to beneficiary(ies) *MTR ^

6 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Structuring & Tax Education Superannuation Tax Rates for 2009/2010 * If the asset was held for 12 months or less, the full nominal gain is taxable ^ 33⅓ discount method on complying superannuation funds Super (Accumulation)Entity Tax Rate Assessable Super Contributions15% Earnings15% Discount* Capital Gains (if applicable)10% Super (Pension)Entity Tax Rate Earnings0% Capital Gains (if applicable) ^0%

7 Structuring & Tax Education SMSF Growth

8 Key Benefits of Super  Taxation Efficiency  Investment Choice  Estate Planning  Pension Planning

9 Structuring & Tax Education Contributions and Tax  Tax Rates  Contribution Limits  Salary Sacrifice  Government Co Contribution  Small Business Concessions  Franking Credits

10 Contribution Limits Contribution Limits for 2009/2010 * less than age 50; **greater than age 50 but less than age 75; ^ between ages 65 -75; ^^ less than age 65 - 3 year limit) Concessional (CC) SG Contribution / Salary Sacrifice Non Concessional (NCC) Capital Gains tax (CGT) Cap $25,000*$150,000 ^ $1,100,000 Lifetime Limit  up to $500,000 Capital Gains - Small Business Retirement Exemption  disposal of business asset exempt from CGT – 15 yr exemption $50,000**$450,000 ^ ^

11 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Salary Sacrifice & Government Co Contributions Salary Sacrifice Government Co-Contribution A = assessable income including salary sacrifice contributions in income thresholds. ContributionTax Concessional Contribution15% Assessable IncomeContributionCo-Contribution < $31,920Any Amount$1,000 Max $31,921 - $61,920Any AmountCalculated $1.00 for every $1.00 > $61,921Any AmountNil

12 Structuring & Tax Education Investment Choices Dispelling the Myths of Super  Superannuation is a structure not an investment  You can control how your monies are invested  Superannuation funds do not have to include volatile assets within your portfolio

13 SMSF  Cash / Term Deposits / Debentures  Managed Funds  Direct Shares  Direct / Listed Property  Commercial Property, Plant & Equipment  Farming Land  Gold, Art, Wine Investment Choices

14 Instalment Warrants Introduced in September 2007, an instalment warrant is a structure that allows you to borrow to acquire assets within a SMSF How does it work?  Create an instalment warrant trust and investment strategy  Lender of your choice (bank or any entity) finances the asset purchase through a limited recourse loan  The instalment warrant trust owns the asset  The SMSF is 100% beneficial owner of the instalment warrant trust

15 Instalment Warrants Who Benefits Most?  Wealth accumulators seeking to expand and further diversify the portfolio of investments in their SMSF  Business owners that wish to rent their own property  Investors seeking to take advantage of the concessionally taxed environment of a SMSF relative to other investment structures such as individuals or companies  Investors looking to build a property portfolio

16 Structuring & Tax Education Estate Planning  Binding Death Benefit Nomination  Reversionary Pension  Wills  Power of Attorney  Testamentary Trusts  Divorce

17 Pension Planning Income Streams  Account Based Pension (ABP)  over age 60, pension payments from taxed superannuation funds will be tax free.  lump sum withdrawals will also be tax free.  Transition to Retirement Pension (TRIS)  aged between 55 and 60, pension payments (less any tax free amount will be taxable and receive a 15% tax offset.  from age 60 income, drawings 100% tax-free  lump sum withdrawals will generally be subject to tax, depending on your age, the total amount withdrawn and your superannuation components.

18 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Case Study Current Scenario DetailsFacts & Figures Age60 Retirement Age70 Annual Income$50,000 Super Balance$500,000 Annual Net Income$41,450 Expected Return6%

19 Structuring & Tax Education Case Study Accumulation Phase Balance = $500K Tax Rate = 15% Pension Phase Balance = $500K Tax Rate = Nil Salary Sacrifice $31,700 Withdraw Annual Pension Income $23,150 Plus Income = $18,300 * Including Medicare Levy – using 2009/10 tax rates ; ^ 100% tax free pension income ; Mature Age Tax Offset (MATO)=$500 ; Low Income Offset=$1,350. These rebates cannot be refunded in the way of income. However any unused credits received from franking will be refunded by way of income.

20 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Sevent h Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Sevent h Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Case Study Salary Sacrifice & Pension StrategyFacts & Figures Contributions Tax$4,755 Salary$18,300 Pension Income$23,150 Assessable Income$18,300 Income Tax *$1,845 Rebates($1,850) Total Tax Payable$0 Net Income$41,450 Do NothingFacts & Figures Income$50,000 Income Tax*$8,550 Net Income$41,450 Total Tax Savings* = $3,795 *Income tax less contributions tax

21 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Case Study Do NothingFacts & Figures Balance in Super Accumulation$500,000 Earnings @ 6.0%$30,000 Tax on Earnings @ 15%$4,500 Total Earnings$25,500 Engage in TRISFacts & Figures Balance now in Pension Phase$500,000 Earnings @ 6.0%$30,000 Tax on Earnings @ Nil$0 Total Earnings$30,000 Super Fund Tax Savings = $4,500 Note that the projections do not take into consideration franking credits

22 Structuring & Tax Education Case Study YearAgeBefore Strategy After Strategy Super After Strategy TRIS TotalStrategy Benefit 160$530,000$26,945$506,104$533,049$3,049 565$669,113$147,544$534,409$681,953$12,840 1070$844,739$346,855$558,105$904,960$60,221 Super Accumulation & Pension Projection Assumptions : SG Contributions payable on salary sacrifice contributions, 6% return, Nil indexation, drawing from pension approximately 4.6% of account balance; considers eligible rebates being low income and mature age offset for 2009/20010. These projections are meant as a guide only and may not necessarily reflect the actual payments received. It has been published as an information service without assuming a duty of care. Subsequent changes may affect the accuracy of the calculation. Strategy Benefit $60,221

23 Centrelink  Commonwealth Seniors Health Card  What it is  Benefits  Eligibility  Age Pension  What it is  Eligibility  Rates  Income And Assets Test  Other Benefits

24 Commonwealth Seniors Health Card (CSHC) What is it? It’s a card offered by the Federal Government to help with the cost of prescription medicines and other services if you are of Age Pension age but do not qualify for the Age Pension

25 Commonwealth Seniors Health Card (CSHC) What services the card helps you with:  Discount on prescription medicines  Bulk-billed GP appointments, at the discretion of the GP  A reduction in the cost of out-of-hospital medical expenses above a concessional threshold, through Medicare Safety Net  In some instances, additional health, household, transport, education and recreation concessions which may be offered by State or Territory and local governments and private providers  You may also be entitled to receive the Seniors Supplement – a non-taxable payment made every 3 months to help with regular bills such as energy, rates and motor vehicle registration fees.

26 Commonwealth Seniors Health Card (CSHC) Eligibility:  Be an Australian resident, living in Australia, and not subject to a newly arrived residents waiting period  Reached age pension age but do not qualify for Age Pension (or do not receive certain other Social Security/Veteran Affairs pensions/benefits)  Provide Centrelink with your and your partner's tax file number or be granted an exemption from providing your and your partner's tax file number, and  Have an annual adjusted taxable income* (ATI) of less than: $50,000 (singles) $80,000 (couples combined), or $100,000 (couples combined who are separated due to ill health) * ATI = Taxable Income, Foreign Income, Total net investment losses, Employer provided benefits & Reportable superannuation contributions

27 Age Pension What is it? If you have reached retirement age, the Age Pension ensures you have a certain level of income in your retirement.

28 Age Pension Eligibility:  You must first satisfy the age and residence requirements - Age for males is 65 and for females this is increasing to age 65  Satisfy an Income and Asset Test (covered shortly)  If you are legally blind, you may be eligible for Age Pension (Blind), which usually has no income or asset test

29 Age Pension Current Payment: * Information as at 20 September 2009 $671.90 pf $1,013 pf $17,469.40 pa $26,338 pa Fortnight Annual Single Couple (combined)

30 Age Pension Income Test: * Information as at 20 September 2009 Full Payment No Payment Single Couple (combined) Up to $142 pf ($3,692 pa) Up to $248 pf ($6,448 pa) Over $1,485.80 pf ($38,631.80 pa) Over $2,274 pf ($59,124 pa)

31 Age Pension Asset Test (Home Owner): * Information as at 20 September 2009 Full Payment Part Payment Single Couple (combined) $178,000 $252,500 Less than $594,750 Less than $925,500

32 Age Pension Income Test: What is included (some):  Personal Earnings  Net income from business, including farming  Deemed income  Net income from property  Family Trust Distributions  Income from Income Streams  Foreign income/pensions What is NOT included (some):  Deductible amount from an Income Stream  Rent subsidy paid from the Commonwealth or State.  Carer Allowance  Emergency Relief  Compensation or loss of, or damage to, building, plant & personal effects

33 Age Pension Assets Test: What is included:  Home Contents  Motor Vehicles/Boats  Holiday Home  Bank Accounts  Investments  Share of Business/partnership What is NOT included:  Family Home *  Funeral Bonds (up to $10,750)  Gifts up to $10K pa & within $30K over a rolling 5 year period * On land of 5 acres or less

34 Age Pension – Important Note Income and Asset Test Assessment: Centrelink apply both the Income and Asset Test, and whichever test pays you the least, is the test which is applied in your circumstances. Ie. If you qualify for the full rate of pension under the Income Test, however, your assessable assets are over the cut-off threshold, then no benefit is payable.

35 Other Centrelink Payments  Disability Support Pension  Carer Payment  Carer Allowance  Newstart Allowance/ Sickness Allowance

36 Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Sevent h Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Sevent h Outline Level  Eighth Outline Level  Ninth Outline LevelClick to edit Master text styles  Second level  Third level  Fourth level  Fifth level Who is Thornton Group ?  Country Culture  Superannuation and Retirement Specialist  Professional and Expert Investment Advice  In house Research Capabilities  Provides Continued Support and Advice  Fee for Service Philosophy  Dynamic Team Service

37 Are You Doing Things the Hard Way?


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