Don’t leave it to late like so many people do and then try to find ways to get their money into super at the last minute. The problem is that too many people put off today that which can be done tomorrow. The Government’s attempt to influence people to begin saving earlier have diminished as a result of the reduced amounts you can contribute to super in any one year tax effectively of <$25,000> per annum <see rates for updates to thresholds>. As a general guide we say start focusing on contributing to super as early as possible, but particularly after you turn 40.
Remember you can draw some money out tax free as early as 55, depending on your preservation age <using a TRIS>. You can also start to withdraw your super as a pension to supplement your income while working at the same time, how flexible is that !…..however not only can you do this, but you can also save tax by employing some strategies before commencing your pension and prior to re-commencing work. One thing the Tax Office have realised is that by making it more flexible to live, work and use super with tax incentives, then more people will contribute to super.
Remember one plan cannot suit all, so see your Accountant or Advisor in setting up a tax effective super plan for your particular situation. However as a general guide, a checklist of what you should consider follows:
- Emergency need to withdraw super now? – and can’t wait until 60, then make use of the tax free component currently <$160,000> (2010)<see rates for updates>.
- Gearing and increase your investment base – Since the government reduced the amount you can contribute to super, and if you are in a similar position to the person depicted in the table above, and don’t have enough super then this strategy may suit you. Recent changes made make if more attractive now take out a loan <instalment warrant loan/now bare trust non recourse loan arrangements>. in your superfund to purchase residential, commercial property and shares. Remember however that gearing generally increases risk and should be taken into account in developing your investment strategy
- Maximise your non deductible contributions <non concessional> into your super currently <$150,000> or <$450,000> (link to rates table) averaged over 3 years. Some ideas are as follows:
- Transfer available cash, or unexpected cash payouts you receive:
- from deceased estates
- redundancy
- and your lucky enough any prizes, lotteries, etc
- Transfer investments such as:
- shares,
- business real property
- Transfer available cash, or unexpected cash payouts you receive:
- Maximise your deductible contributions <concessional contributions> – into your super currently <$25,000 – check rates table update>.
- <Make excess contributions> – above the cap where you have losses in your superfund, read more on <anti-deteriment strategies> and how this can make this strategy work.
- Preserve your tax free contributions – Consider setting up <Separate Super Accounts> to quarantine these tax free contributions for estate planning purposes.
- Selling your business? make sure to take advantage of the following tax saving ideas:
- <15 year exemption> – pay no tax on proceeds from sale of business if you were carrying on business of over 15 years up to a life time cap of <$1,355,000-check rates table update> (2011 CPI indexed): and
- <retirement exemption> – pay no tax up to the same life time cap of <$1,155,000-check rates table update>
- Consider distributing trust business profits to super – your situation may make this viable, especially if your under funded in your super, see <ATO-Link>
- A Bankrupt ? – then make use of any money owing to you as a termination payment and pay it into super and pay no tax. <Also consider genuine redundancy> .
- Avoid Div7A Loans – maximise super to reduce your income (distributable surplus) in your business to nil.
- Consider accessing the pension before 60 – if the pension minimum payment is small it might be ok, otherwise maybe better to wait till ABP available and the 15% rebate? Accordingly consider using only a portion of the accumulated interest account or a tax free portion to start your pension if you have multiple accounts for example.
- If your over 55 and you want to reduce your hours but can’t afford it? – consider drawing a pension and work part-time at the same time….now you can afford it….start a <TRIS> today.
- If your over 55, draw a lump sum now from your Super – but caution! It’s still better (usually) to wait to 60, but it does depend on the amount in your super and you personal taxable circumstances.
60 couldn’t be any better! <Retire> and you can now withdraw your superannuation tax free whilst in <pension phase> having met a condition of release. If you haven’t met a condition of release such as retiring, then wait until you are 65.
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