maximise your superannuation and tax benefits smart eofy strategies for 30 june 2013 maximise your...

Maximise your superannuation and tax benefits

Smart EOFY strategies

For 30 June 2013

Maximise your superannuation

2Maximise your superannuation and tax benefits

Disclaimer

This information has been prepared by MLC Limited (ABN 90 000 000 402) 105-153 Miller Street, North Sydney NSW 2060, a member of the National Australia Bank group of companies. This information was produced as an information service and without assuming a duty of care. This information is for adviser use only. It contains general information only. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice.

In preparing this information, MLC Limited did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances.

The information in this presentation is based on our interpretation of relevant laws as at 1 April 2013 and is subject to change. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk.

• MLC is not a registered tax agent. If you wish to rely on this information to

determine your personal tax obligations you should seek advice from a

Registered Tax Agent.


3Maximise your superannuation and tax benefitsMaximise your superannuation


Why invest via super?

Super strategies

Insurance

Other tax-effective year-end opportunities

How I can help

Agenda



Why invest via superTax concessions every step of the way

1. When you contribute to super• Make contributions from pre-tax salary• Claim contributions as a tax deduction• Get a Government co-contribution of up to $500• Get a tax offset of up to $540

Now Retirement

1 Includes a Medicare levy of 1.5%.






2. While build up super• Earnings in fund taxed at max. of 15%• Earnings from investments in

own name taxed at up to 46.5%1

Now Retirement





2. While build up super• Earnings in fund taxed at max. of 15%• Earnings from investments in

own name taxed at up to 46.5%1

3. When use super to pay pension• No tax on investment earnings• Tax offset between 55 and 59• Tax-free income at 60+


Now Retirement



Super EOFY strategies

Get more from your salary or bonus

• For employees

• Called salary sacrifice

• Contribute pre-tax salary or bonus into super

• Contribution taxed at max. 15%, not marginal rate up to 46.5%1

• Grow retirement savings

• Reduce tax payable on salary or bonus by up to 31.5%

You can only sacrifice prospective salary or a bonus into super (ie income to which you are not already entitled) and need to make an effective salary sacrifice agreement with your employer




Salary sacrifice case study

William is aged 45• About to receive a $5,000 pa salary increase

• Will bring his total salary to $100,000 pa

• Considering salary sacrificing this additional $5,000 into super



Salary sacrifice case study

Per annum Sacrifice pay rise

into super

Receive pay rise

as after-tax salary

Pre-tax pay rise $5,000 $5,000

Less income

tax at 38.5%1

(N/A) ($1,925)

Less tax on

super contribution

($750) (N/A)

Net amount invested $4,250 $3,075

Tax paid on earnings 15% 38.5%




Assumptions:. A 20 year comparison based on $5,000 pa of pre-tax salary. Both the super and non-super investments earn a total pre-tax return of 7.7% pa (split 3.3% income and 4.4% growth). Investment income is franked at 30%. All values are after income tax (at 15% in super and 38.5% outside super) and CGT (including discounting).

Note: No lump sum tax is payable on the super investment as William will be 65 at the end of the investment period.

Results (after 20 years)

Receive pay rise as after-tax salary and invest outside super

Salary sacrifice pay rise

into super

$0

$189,371

$119,485

$80,000

$120,000

$160,000

$200,000

$40,000

+ $69,886




Make tax deductible super contributions

• For people who are self-employed or not employed

• Make personal super contributions

• Claim some (or all) of contribution as tax deduction

• Grow retirement savings

• Use deduction to reduce taxable income and income tax payable

To be able to claim a portion of your personal super contributions as a tax deduction, you need to complete a valid ‘notice of intent’ form and give it to your super fund within specific timeframes. If you don’t you may not be able to claim a deduction. (You also need to be eligible to make a contribution).



Consider contribution caps

• Salary sacrifice and personal deductible contributions count, along with other amounts, to ‘concessional’ contribution (CC) cap

• The cap is $25,000 in 2012-13

• The caps are annual amount and you can’t carry forward any unused amount to another financial year

• It’s really important you make the most of the cap each year, particularly if you are approaching retirement

• Opportunity to make larger ‘last minute’ concessionally taxed contributions no longer available



Cap implications

• Penalty tax of 31.5% payable are applicable on excess contributions for the

2012-13 financial year

• Review this year’s contributions and remember that a range

of other items count towards this cap, including:

– super guarantee conts, including those from more than

one employer

– concessional conts made to fund insurance in super

• Review contributions from 1 July, particularly if you are an employee

as the superannuation guarantee rate will increase from 9% to 9.25%




Get a super top up from the Government

• For people who earn:

– at least 10% of income from employment or self-employment

– a total income of $46,920 or less

• Make personal after-tax contribution

• Get up to $500 in free super from Government

• Spouse may qualify for co-cont if you earn too much



Co-contribution case study

Ryan is aged 40• Employed on salary of $37,000 pa

• Wants to invest $1,000 in after tax salary each year until he retires at 60



Co-contribution case study

In 2012/13 Invest outside super Make personal

super contribution

Amount invested $1,000 $1,000

Co-contribution $0 $331

Total investment $1,000 $1,331

Tax paid on earnings 34% 15%



Assumptions:. A 20 year comparison based on an after-tax investment of $1,000 pa. Both the super and non-super investments earn a total pre-tax return of 7.7% pa (split 3.3% income and 4.4% growth). Investment income is franked at 30%. All values are after income tax (at 15% in super and 34% outside super) and CGT (including discounting).

Note: No lump sum tax is payable on the super investment as Ryan will be 60 at the end of the investment period.

Results (after 20 years)

$1,000 pa invested outside super

(no co-contribution)

$1,000 pa investedinside super

(includes co-contribution)

$0

$58,810

$40,341$40,000

$60,000

$80,000

$100,000

$20,000

+ $18,469




Boost partner’s super and reduce your tax

• For people who have a spouse who earns less than $13,800 pa

• Make after-tax super contribution on their behalf

• Get tax offset of up to $540

• Grow spouse’s super and reduce your tax



Buy life and total and permanent disability insurance in super

Buy insurance in super with pre-tax dollars Employee

Claim super contributions as tax deduction Self-employed

Use co-contribution to help pay for future insurance Eligible for

co-contribution

Concessions can:• make it cheaper to insure through super, or• enable you to purchase a higher level of cover

Other super EOFY strategiesMake insurance more affordable



If want to bring forward tax deductions and pay less tax this financial year, you could:

• pre-pay annual premiums for an income protection policy held in your own name

• pre-pay up to 12 months interest on an investment loan (usually only available with fixed rate facilities)

Other smart EOFY opportunitiesPrepay expenses



Pay less tax on investment earnings

• Cash out non-super investment

• Make personal super contribution

• Earnings in super fund taxed at max. rate of 15% (proposed to increase to 30% for people earning over $300k pa.)

• Earnings from investment in own name taxed at up to 46.5%1

• Reduce tax on investment earnings by up to 31.5%

• Consider capital gains tax payable when selling asset


Other super EOFY strategies



If make capital gain on asset sale this financial year, consider:

• triggering a capital loss by selling another investment, or

• making a super contribution and claiming amount as tax deduction (if eligible)

Both strategies could be used to offset capital gain and save tax

Other smart EOFY opportunitiesManage CGT



Strategy wrap-up30 June 2013

Super strategies• Salary sacrifice contributions• Personal deductible contributions• Co-contribution• Spouse contribution

Insurance strategies

• Buy insurance in super• Pre-pay expenses

Other smart opportunities

• Invest non-super money in super • Manage CGT

Start planning for EOFY 2013/14 now

Key issues to consider• Review concessional contributions• Review TTR strategy• Make the most of your tax refund



Next steps

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Questions


maximise your superannuation and tax benefits smart eofy strategies for 30 june 2013 maximise your...

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