Superannuation
What is Superannuation?
Superannuation is a tax advantaged place to save and invest for your retirement. Apart from tax deductions available on contributions, earnings are taxed in the fund at a reduced rate of 15 per cent instead of at your marginal tax rate plus the Medicare levy which could be up to 46.5 per cent. Most capital gains in super are also taxed at an effective reduced rate of 10 per cent. Your retirement benefit will also be subject to concessional rates of tax when you retire.
We are not owned by a bank, fund manager or life insurance company. Josman Financial Group is an authorised representative of Charter Financial Planning Limited who hold their own Australian Financial Services License (234665). This ensures that our advice and recommendations are in your best interest only.
Retirement and Superannuation
The goal of superannuation is to help you save and invest during your working life, so that you will have money to live on in retirement.
Super opportunities in 2011
The government's big changes to simplify super offer great opportunities for a range of people - from super savers to current retirees.
Super unlimited!
The government has scrapped the ‘reasonable benefits limit' that previously put a cap on how much you could save in super before it stopped being taxed concessionally.
You can now have as much money as you want in super with the only ‘limits' being the annual caps for contributions - see Limits on super contributions.
Tax free benefits
If you're over 60, any money you withdraw from a taxed super fund is tax free!
If you're under 60 when you withdraw money from super, tax will still apply at different rates. How much tax you pay will depend on whether you've withdrawn the money as a lump sum or a pension.
New rules for super pensions
For pensions there is now one simple set of rules, requiring a minimum annual payment but no maximum.
And if you're over 60, the pension payments will be tax free to you as well!
No more compulsory cashing
Prior to 10 May 2006, unless you met certain work requirements, you had to withdraw your super savings at age 65 - or 75 at the very latest. This compulsory withdrawal of superannuation requirement has been removed.
This means your super savings can remain in the system indefinitely, attracting the concessional tax treatment and allowing you access whenever you like after you turn 65.
Limits on undeducted contributions
From 1 July 2011, an annual limit for undeducted contributions is $150,000. However, if you are under 65, you can bring forward two year's worth of contributions and get up to $450,000 into your super in one year. Of course this limits how much you can put in over those next two years.
You need to be careful how much you are putting in because if you exceed the cap the excess amount is taxed at 46.5%.
Simpler deductible contribution rules
The maximum deduction that can be claimed for a contribution to super is $50,000 per person per year - until you reach 75.
The limit applies across all employer, personal and salary sacrificed contributions. If you go over the limit you'll lose 46.5% of the excess amount in tax.
If you're turning 50 between 1 July 2007 and 30 June 2012, a transitional period will apply, allowing you to make annual contributions of up to $100,000, until the end of that period (2011/12).
Super improvements for self-employed
If you receive more than 10% of your income from employment sources and you earn less than $61,920 per year, you currently qualify for a government co-contribution to your super if you make a personal after-tax contribution.
This co-contribution now also applies to you if you're self-employed.
And self-employed people can now also claim a tax deduction for 100% of all pre-tax contributions up to age 75.
Super and death benefits
Any lump sum payments to your tax dependants - your spouse, children under 18 and others financially dependant on you - are now tax free.
These dependants can also receive benefits in the form of a pension, with the tax treatment dependent upon their age.
Non-dependants, such as children over 18 and your estate, can only receive your death benefit in the form of a lump sum. They may be taxed on this payment.
Unlocking your super while you're working
Previous changes to the super rules, effective from 1 July 2005, allow you to access your super at age 55 without retiring. This is done via a pre-retirement pension. You can receive income from the pension while salary sacrificing to super until you decide to fully retire.
Since 1 July 2007, if you're 60 or over, this strategy may be even more beneficial to you as your pension payments are now tax free - and you're still able to salary sacrifice. There are, however, limitations on how much you can sacrifice.
Getting started
Like to know how you how to best take advantage of these opportunities?
Click here to contact the team for your obligation free consultation.
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