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Self (Mis) Managed Super Funds
- 1. Self Mis -Managed Super Funds Presented by Lincoln Frost Wealth Adviser
- 3. 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
- 4. • 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
- 5. • 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 rate Up to 49% 30% 15% 0% Tax rate (capital gain) Under 12 months – treated as income Over 12 months – 50% discount Treated as income Under 12 months – treated as income Over 12 months – 33% discount 0%
- 6. • 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
- 7. 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
- 8. • 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 $20,000 Net contribution to fund: $17,000 Excess tax: 15% x lesser of $100,000 and $20,000 Excess tax = $3,000
- 9. 9.2 6.1 2.0 6.2 7.5 3.7 8.2 5.1 6.4 9.4 5.4 1.7 5.1 6.2 3.0 7.2 4.4 5.5 7.1 4.2 1.1 3.3 3.9 1.9 5.8 3.2 4.1 9.6 5.4 1.7 5.3 6.3 3.1 7.3 4.4 5.6 BEFORE AND AFTER TAX RETURNS (10 YEARS TO DECEMBER 2013) Gross return After Tax Lowest MTR After Tax Highest MTR Superannuation CPI 2.8
- 10. Franking Credits – a little bonus Example: $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%
- 11. 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
- 12. • 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
- 13. • Mathematical versus emotional • Debt needs over time – house upgrade, renovations etc • It’s about balance Put money toward your mortgage or super??
- 14. What we do with Barristers
- 15. What we do with Barristers
- 16. • 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
- 17. 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
- 18. • 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
- 19. • 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
- 20. • 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
- 21. ODYSSEY
- 22. Self Mis -Managed Super Funds Presented by Lincoln Frost Wealth Adviser
Editor's Notes
- Good afternoon ladies and gentleman, my name is Lincoln Frost, I work as an adviser at Odyssey Financial. We presented here on practice management - income protection a few months back. At the time many of you expressed your interest in hearing about superannuation, specifically self-managed superannuation so we have put together a short presentation tailored to Barristers . One of you used the term self mis-managed last time we were here and we thought that sounded pretty correct so borrowed the term! Thank you very much for having us back again. In our opinion, everyone should have a level of self management of their super. You don’t need to own your own super fund in order to take control over your super. Can I have show of hands who has their own fund here? That’s great. A lot of the content I will discuss covers superannuation in general so hopefully everyone will take something from this presentation.
- This is general advice only. All discussions even though they may relate to some of your questions are general only and should not be interpreted as advice.
- Today I thought we’d cover off on superannuation in general. I’m sure many know a reasonable amount about super so I’ll only briefly touch on some areas and dig into more detail with others. SMSF versus personal super plans Contributing to super – types and limits, changes Investments – where to invest and what returns are like; we are going to look at the after tax impact of various investments under different tax situation Debt reduction versus super contributions – one of the biggest questions we get asked, super or mortgage, we take the emotion out and talk about the maths. Self managed super funds – typical things that we see and then what we do I won’t cover all the points on the slides, just the main ones. If you want more information please see us after and we can organise a time to meet.
- We don’t see why it would ever be less favourable than individually holding assets. There will always need to be some incentive for putting your $$ there. In a weeks time the top marginal rate will be 49% with debt levy and medicare increase There are really only 4 tax structures for investment in Australia – Individual, Company and super/ pension. The other is through a trust which is essentially a combination of the above subject to the beneficiaries of the trust.
- Concessional contributions are called that as the contributor claims a concession for the contribution – these contributions attract a 15% tax in the fund. Barristers would be familiar with making personal deductible Non-concessional, as the name implies, do not attract a concession. These are monies that have already had tax paid at some point. They do not attract any contribution taxes. First time the caps have been lifted since 2009
- Explain slide clearly Does not take into account any earnings you have on those tax savings also
- Quick overview
- So we’ve covered how to get money into super, how let’s discuss what happens with its in there. These are the after tax returns for various asset classes under various tax situations. No gearing covered here Does this surprise anyone? Its about having the right mix
- Habits carry through How much is needed in retirement??
- The biggest impact of our advice is helping barristers understand what is and isn’t possible. We help make ideas into reality. We look at the whole picture
- Debt does need to be paid off, but there should be a strategy for doing it Your wealth accumulation plans go hand in hand with your debt payment plan It’s about finding the right balance
- Explain briefly what self managed funds are
- Explained personal super
- Investment strategy – doesn’t consider timeframe, risk profile, liqudity, tax Summarise
- Consider risk profile of members, investment mix across asset types plus the investment types; shares, ETF, hybrids, listed income notes
- Recap on the presentation, explanation of super, how to get it in, the tax benefits, understanding how it is invested and why, common situations we see and what we do about them, and smsf, problems and solutions. We only touched the surface on a lot of things so please speak to one of us to organise a follow up. Finally, don’t leave something until tomorrow when you can do it today! Acting now starts the compounding process early, and this works wonders over time.
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