Superannuation Discussion + market volatility

[burnt]

If you want to make a difference for your grandchildren, get them a TFN at birth, and if you are self employed, pay the grandchildren a small figure ($100) per year for doing SOMETHING and also up a low fee industry super account in their name. Contribute $1,000 to the superfund as a personal contribution and lodge a tax return for the grandchild. PRESTO- they will receive $500 super co contribution. We have 10 grandchildren and they are all "on the plane" with the this and they will all benefit later in life. My son who is now aged 28 started this aged about 13 and salary sacrifices a little also and has just over $200K in super.

 

[pagingjoan]

If you want to make a difference for your grandchildren, get them a TFN at birth, and if you are self employed, pay the grandchildren a small figure ($100) per year for doing SOMETHING and also up a low fee industry super account in their name. Contribute $1,000 to the superfund as a personal contribution and lodge a tax return for the grandchild. PRESTO- they will receive $500 super co contribution. We have 10 grandchildren and they are all "on the plane" with the this and they will all benefit later in life. My son who is now aged 28 started this aged about 13 and salary sacrifices a little also and has just over $200K in super.

Am I simply a "Tax naif"?
How can an infant be a genuine "worker"?
(Genuine question, by the way.)

 

[QF WP]

Minors can apply for a TFN (and in some cases must have a TFN, for example if the recipient of income from a Trust), as can be seen here and here. All they need is a parent or guardian with the authority to act.

Minors income (and taxation) is shown here: https://www.ato.gov.au/individuals/...-income-if-you-are-under-18-years-old/?page=3. However there are two specific tests - are you an excepted person or do you receive excepted income. This page is also a good summary of the position.

 

[pagingjoan]

Minors can apply for a TFN (and in some cases must have a TFN, for example if the recipient of income from a Trust), as can be seen here and here. All they need is a parent or guardian with the authority to act.

Minors income (and taxation) is shown here: https://www.ato.gov.au/individuals/...-income-if-you-are-under-18-years-old/?page=3. However there are two specific tests - are you an excepted person or do you receive excepted income. This page is also a good summary of the position.

Thank you, QF WP. Yes, the first part I understood.
Will now explore the references you have kindly provided - and will, no doubt, increase my knowledge of this topic (from a very low base) by around 500%!

 

[burnt]

Grandchildren were paid a "modeling fee" for photographs taken for a calendar we were going to publish and have delayed for a year, may need some new pictures next year?

 

[QF WP]

Exactly - (grand)children can be employed in a closely-held business for any number of tasks. Recommend always having diary notes kept of tasks performed and time taken (no need to put them on an employment contract just yet). I could have my kids here in my business to put away client files, sweep/vacuum floors, etc. YMMV.

 

[JohnK]

Exactly - (grand)children can be employed in a closely-held business for any number of tasks.

My daughter mops the floors.

This is a briiliant idea.

 

[Pushka]

I like the Picture idea. If I mention this idea to Number 1 son it make might him do something about us becoming Grandparents!

 

[rogerkambah]

Babymop

I expect the protective clothing would be tax deductible too.

My daughter mops the floors.

 

[jenib]

We first saw an independent financial advisor about 15 years ago. We didn't do what was advised and when we returned a few years later, he asked us if we would like to know how much money we would have made if we had followed the suggestions. (Answer - no thanks).

We go back to see him every year or two depending on what is happening. Since the first visit we have followed the advice most of the time, and each time we visit I learn something beneficial, get good news about our financial position and always walk away happier that we have a sustainable, comfortable future (including travel!). The choice of what to do is always our own.

Our newest interest is ensuring that our children are set up well, won't be ripped off by unscrupulous people (or love interests that sour) and won't be able to blow the funds without check - so we are planning to obtain professional advice from a recommended estate planner.

You don't know what you don't know.

 

[get me outta here]

A retired relo asked, after this f/y, what is pa $ limit a person over 65 -70 can add to their accumulation fund (as they want to move it out of term deposits)?

 

[QF WP]

See here: https://www.ato.gov.au/Individuals/Super/Super-changes/Change-to-non-concessional-contributions-cap/

in particular:

[h=2]How has the non-concessional contributions cap changed?[/h]Non-concessional (after-tax) contributions include:

• personal contributions for which you do not claim an income tax deduction, and
• spouse contributions.

If you have more than one super fund, all non-concessional contributions made to all of your funds are added together and counted towards the non-concessional contributions cap.
From 1 July 2017, the annual non-concessional contribution cap will be reduced from $180,000 to $100,000 per year. This will remain available to individuals aged between 65 and 74 years old if they meet the work test.
The non-concessional contributions cap is set at four times the concessional contributions cap ($25,000 for 2017–18) and will increase in line with the indexation of the concessional contributions cap.
From 1 July 2017, your non-concessional cap will be nil for a financial year if you have a total superannuation balance greater than or equal to the general transfer balance cap ($1.6 million in 2017–18) at the end of 30 June of the previous financial year. In this case, if you make non-concessional contributions in that year, they will be excess non-concessional contributions.

For personal (non tax deductible) contributions, it will reduce to $100,000 per annum for people over 65 (they can't access the bring forward provisions of $300,000 over 3 years like people under age 65 ).

The bad news is that they still need to meet the work test (linked above). Unfortunately, it was proposed in the 2016 Budget to be abolished, however those Budget measures were abandoned in the 2017 Budget. So based on the information you have given, it is unlikely they can make the contribution next FY.

 

[get me outta here]

Thanks for that link. Wow, that seems to be that if he has a lot of TDs (175K), he should try to liquidate them now and pay in before Friday. Talk about leaving things till the last minute.

 

[QF WP]

Would seem that he will be unable to make the contribution this FY either, even if he were able to break the TD before 30 June and ensure the super fund received the $ into his existing account by COB Friday. The issue is he appears to already be retired and even if he were able to find a job now, he has to meet the work test FIRST (work 40 hours within the next 4 days) before being eligible to make the contribution.

 

[love_the_life]

Would seem that he will be unable to make the contribution this FY either, even if he were able to break the TD before 30 June and ensure the super fund received the $ into his existing account by COB Friday. The issue is he appears to already be retired and even if he were able to find a job now, he has to meet the work test FIRST (work 40 hours within the next 4 days) before being eligible to make the contribution.

Yes, I needed to move money in to super quickly as I hit 65 in July and am not working. I wanted to have it sorted this FY even though there are a few weeks in July before the 'day'. Done

 

[get me outta here]

Many thanks WP. I have passed this on. It will all need to be next year and do the 40 hours. I think he plans to help out a mate in his small business by sweeping the drive way or something.

I'll tell him to limit it to 100K.

PS, the 40 hours could be from say mid June 17 to mid July 17?

 

[love_the_life]

Many thanks WP. I have passed this on. It will all need to be next year and do the 40 hours. I think he plans to help out a mate in his small business by sweeping the drive way or something.

I'll tell him to limit it to 100K.

PS, the 40 hours could be from say mid June 17 to mid July 17?

My understanding is that the work test is 40 hours in any 30 day period over a financial year, but I may be wrong.

 

[get me outta here]

Yes, understood, I was thinking he may do a bit this f/y and then next. But, it will all be next f/y now.

My understanding is that the work test is 40 hours in any 30 day period over a financial year, but I may be wrong.

 

[QF WP]

Many thanks WP. I have passed this on. It will all need to be next year and do the 40 hours. I think he plans to help out a mate in his small business by sweeping the drive way or something.

I'll tell him to limit it to 100K.

PS, the 40 hours could be from say mid June 17 to mid July 17?

love_the_life is correct, but it is important to distinguish that it must be within a consecutive 30 day period within the financial year in which the contribution is made. The "work test" was linked in my previous post, but might not have been noticed, so here it is again: https://www.ato.gov.au/individuals/...too-much-can-mean-extra-tax/?page=2#Work_test

I have a number of clients that meet the work test within the first 7 or 14 days of a financial year, however it doesn't matter whether it straddles weeks or two months, so long as it is within the consecutive period. They will also be asked to sign a declaration to that effect before the superannuation fund can accept the contribution. I also have clients that only make the declaration (and contribution) at the end of the financial year, but met the eligibility of the work test in the first 2 weeks of July 2017. In fact, I have just come from two clients this morning where that was their exact scenario (both over age 65, met the work test, signed declaration in June 2017 before making the contributions - one was employer [salary sacrifice] and the other was personal non-deductible).

So long as there is evidence to prove either the employer/employee relationship, or in the case of self-employed (in case the ATO ask) then the contribution will be accepted. So employment declarations (when joining an employer), a job description (written is preferred to verbal) and going through the books (doesn't matter whether cash in hand if under the tax threshold, or even better where tax is deducted). The "thicker" the trail, the easier it is to defend.

 

[get me outta here]

Great info thanks again WP. He doesn't pay tax, so is it best if the small business is given his TFN or not, ... if there is a choice in that?