Superannuation Discussion + market volatility

[cove]

We now have a 91 year old mother in law with us about 5 nights a week. She still beats us both in footy tipping each year and now she has the gold card . Legacy was brilliant in helping us get that for her. In her local area she has now lost almost all of the people she grew up with. Once you make it to ninety it can get lonely as neighbours are no longer there. I now get her food parcels in the form of 5% off Woolies and Coles gift cards and she gets what she wants at those stores.
We have our eldest son planning to come back home as he makes a 2018 plan to go and study in Madrid.
It is a boomerang generation when you are boomers with grown up children.
We have had years of never being able to spend all that we earned and superannuation is something we want our two sons to handle themselves. I think a co contribution making it to 20% a year in total will get them set.

 

[JohnK]

There is now a $25k limit on how much SG and Salary sacrifice you can do now. Thanks Mr Turnbull.

Yes I do realise there's a new limit you can salary sacrifice. Should be sufficient for me.

Accountant mentioned on the phone the other day that voluntary contributions can be tax deductible. Is this included in the same limit as above?

I mentioned $30,000/pa income stream from superannuation as I've already got ~$30,000/pa income stream from real estate.

And there's also a small share portfolio that I use to re-invest dividends.

And some term deposits which ideally I'd like to reinvest elsewhere without great risk.

I think $60,000/pa is enough income in retirement. I'd need enough for daughter's schooling and weekly food bill. We don't drink and don't eat out. Let's say a couple of trips/year to Thailand. Anything more would be a bonus.

 

[Pushka]

Yes I do realise there's a new limit you can salary sacrifice. Should be sufficient for me.

Accountant mentioned on the phone the other day that voluntary contributions can be tax deductible. Is this included in the same limit as above?

I mentioned $30,000/pa income stream from superannuation as I've already got ~$30,000/pa income stream from real estate.

And there's also a small share portfolio that I use to re-invest dividends.

And some term deposits which ideally I'd like to reinvest elsewhere without great risk.

I think $60,000/pa is enough income in retirement. I'd need enough for daughter's schooling and weekly food bill. We don't drink and don't eat out. Let's say a couple of trips/year to Thailand. Anything more would be a bonus.

I think personal contributions are limited but not included in that amount. It’s age dependent as to how much you can put in.

 

[JohnK]

I think personal contributions are limited but not included in that amount. It’s age dependent as to how much you can put in.

I'll talk to accountant next month. It could be worthwhile to dump some term deposits into superannuation if it means saving tax.

Actually this could also benefit younger brother as he has been retired 10+ years but still pays tax.

 

[Pushka]

I'll talk to accountant next month. It could be worthwhile to dump some term deposits into superannuation if it means saving tax.

Actually this could also benefit younger brother as he has been retired 10+ years but still pays tax.

I didn’t know about the tax deductibility of these until I read it in this thread. Must say my accountant has been very unhelpful in recent years.

 

[JohnM]

Voluntary contributions are tax deductible so long as you meet the work test (minimum 40 hours in a 30 day period) up to age 75, after which personal contributions to super are not permitted.

The total concessional contribution is now limited to $25K pa, so anyone (ie. wage and salary earners, not just the self-employed) getting less than that in employer Superannuation Guarantee can top up to the $25K and claim the top-up VC as a tax deduction.

It can be worthwhile to have some work in retirement to allow for continued contribution/recontribution to super if you continue to have a taxable amount of income in retirement. (It's probably also good for one's general well-being.)

 

[Jacques Vert]

Voluntary contributions are tax deductible so long as you meet the work test (minimum 40 hours in a 30 day period) up to age 75, after which personal contributions to super are not permitted.

Just a point of clarification: the work test does not apply to those under 65. (This is not advice.)

 

[CaptJCool]

Personal super contributions. From the ATO

 

[Jeffrey O'Neill]

There is now a $25k limit on how much SG and Salary sacrifice you can do now. Thanks Mr Turnbull.

The change had to be made as super was increasingly seen as a tax effective generational wealth transfer system.

Soon the cost of super tax concessions will be more than the cost of the aged pension, and both are some of the fastest growing costs to the budget.

 

[cove]

Health,age pension and unemployment benefits are now very large outgoings in the Federal budget.
Just moving the retirement age to 67 caused a huge uproar so getting that age to 70 will be a problem for the future. The tightening of the rules on disability benefit payments has started.
If wages inflation gets going the income tax harvested from this is significant.
Including the family home into age pension calculations would be hard to legislate.
Back in superannuation using sum of annuity calculations the sooner a taxpayer gets to contribute extra the faster the accumulation occurs. At 7% money re-invested doubles in 10 years and the Future Fund is looking to achieve this type of annual return.
The $25,000 maximum annual contribution has stopped wealth transfer to the next generation now but was late in coming.Taxing amounts over $1.6 million does make sense.
Finally make sure you have completed a binding death benefit document so your superannuation can be paid out to nominated beneficiaries in the event of an early demise.

 

[Jeffrey O'Neill]

Health,age pension and unemployment benefits are now very large outgoings in the Federal budget.

To put things into perspective for the current federal budget out of a $464B spendathon $64.3B is assistance to the aged, while assistance to the unemployed and sick is just $10B. I highlight this as too often the media and politicians report about the unemployed as if they're a giant leech on society when they actually represent one of the smaller budget expenditures.

Health is $75B and one of the biggest drivers of health costs has been the blowout in medicare GP costs as the Govt continues to bring in overseas trained doctors to work in regional areas, but when their 5 or 10 years is up they move into a capital city. The number of doctors in Australia rose by 47% in the decade to 2014-15, around 2.5 times the 19% growth in the overall population. Much of this growth has come from OTDs (Overseas Trained Doctor), whose numbers have ballooned-out by a whopping 111% over this period.

A bit of a rant for the below, but I honestly don't think many of the political class quite grasp what's going on with the health budget.

The purpose of the OTD promotion policy was to get more doctors into under serviced areas, particularly RA 2-5 areas. As with most policy in Australia we've achieved the opposite with most of the extra OTDs, by 2014-15, practising in RA 1 areas. Of the total increase in OTDs (6,946) 4,520 were practising in RA 1 areas and 2,426 in RA 2-5 areas.

By June 2015, for all of Australia, OTDs made up 39.7 per cent of the workforce but received 49.8 per cent of total rebates. In RA 1 areas they made up 38.1 per cent of the total workforce and received 47.6 per cent of services paid for by Medicare. [OTD] numbers have been rising at up to 17.2 per cent per annum since 2010.

There is no end in sight. With supply well ahead of population expansion, the competition for patients is set to get worse. In the case of the recruitment of OTDs, the Government has taken no notice of the GP oversupply. It continues to allow employers to sponsor new OTDs to DWS locations. So, when OTDs leave, many are being replaced. In 2014-15 there were 1,132 OTD GPs sponsored on 457 visas and in the first six months of 2015-16, another 582. Also, the Australian Government has left GPs on the Skilled Occupation List of occupations that are eligible under the permanent-entry skilled migration program. Hundreds of OTDs are being granted such visas for service in DWS and hospitals each year.

It would be cheaper in the long run to offer better pay to for local doctors to move to regional areas than continue with the never ending importing of more doctors that will generally end up in a corporate bulk billing clinic and ensure the roughly 40% growth rate of pathology and radiology that occured over the 2004-05 to 2014-15 period.

 

[Pushka]

Voluntary contributions are tax deductible so long as you meet the work test (minimum 40 hours in a 30 day period) up to age 75, after which personal contributions to super are not permitted.

The total concessional contribution is now limited to $25K pa, so anyone (ie. wage and salary earners, not just the self-employed) getting less than that in employer Superannuation Guarantee can top up to the $25K and claim the top-up VC as a tax deduction.

It can be worthwhile to have some work in retirement to allow for continued contribution/recontribution to super if you continue to have a taxable amount of income in retirement. (It's probably also good for one's general well-being.)

Just checking terminology.
VC are after tax dollars in this situation and that too comes under the $25k limit or are you talking about Sal Sac?

I thought the term was Personal Contributions for after tax dollars into Super and that limit was much higher.

The change had to be made as super was increasingly seen as a tax effective generational wealth transfer system.

Soon the cost of super tax concessions will be more than the cost of the aged pension, and both are some of the fastest growing costs to the budget.

And as a consequence we suffer as as try boost our Super to way less than the amounts mentioned in our thread at a time (early 60’s) when we need to and only in last couple of years does our business income afford us the opportunity to Salary Sacrifice. And now we can’t do much. Stinks. Won’t qualify for pension. Maybe we will just spend our Super and qualify. No doubt that too will change.

 

[JohnM]

I probably got the 'personal contribution' terminology wrong but the bottom line is that $25K pa can be contributed tax concessionally - in any mix of SG/salary sacrifice/after-tax contribution.

Just make sure not to breach the $25K limit.

 

[burmans]

I probably got the 'personal contribution' terminology wrong but the bottom line is that $25K pa can be contributed tax concessionally - in any mix of SG/salary sacrifice/after-tax contribution.

Just make sure not to breach the $25K limit.

You can put in 25K concessionally and $100K non-concessionally, and the last has a bring forward provision so you can put in 3 years in 1 (but having done so you can't do any post-tax contributions for the next two years so this is really only useful in your last year of contributions).

 

[Pushka]

The change had to be made as super was increasingly seen as a tax effective generational wealth transfer system.

Soon the cost of super tax concessions will be more than the cost of the aged pension, and both are some of the fastest growing costs to the budget.

You can put in 25K concessionally and $100K non-concessionally, and the last has a bring forward provision so you can put in 3 years in 1 (but having done so you can't do any post-tax contributions for the next two years so this is really only useful in your last year of contributions).

So. Without giving me financial advice

A person can put in $25,000 of combined SG and salary sacrifice.

That same person can also put in up to $100,000 of money that have paid tax on or personal money (and could put in $300,000 in one year and nothing for the next 2 years afterwards).

 

[cove]

You could each go $125,000 /$325,000 this year of which $100,000 /$300,000 would get you no tax concession from the contribution. If you go that 3 year in one contribution the only benefit is the extra income earned is at a low rate in your super fund.

 

[lovetravellingoz]

You can put in 25K concessionally and $100K non-concessionally, and the last has a bring forward provision so you can put in 3 years in 1 (but having done so you can't do any post-tax contributions for the next two years so this is really only useful in your last year of contributions).

It can be useful if you happen to have a large lump sum in any one year for whatever reason.

I now have this very consideration with my wife who has just received a redundancy offer where all up it about 2 years of salary and in the main tax free and so she has over two years of non-concessional super that we can place in if we choose too.


Other people may have inheritances or have sold off some assets.

I my case I am also considering selling some shares with losses and and equal balance of ones with a profit so they net effect being I can move in the tax shelter of super. Though I must admit that I have some concerns of having more in super due the unknown of what future governments may do in terms of changing super.

 

[casanovawa]

Interesting reading... Am considering taking a severance offer also but as I'm only 44 i guess i will need to to get another job sometime if i do as probably a bit early to pull up stumps.. I do mull over the option of all the stresses of trying to make ends meet down in Oz on limit savings of at some point moving to Thailand or Indonesia or Vietnam where I'm sure you could live pretty comfortably for $20-30k a year or less... Even if just for a bit before coming back to Oz or spending time in both places throughout the year...

Also mulling over getting a tax file number for my 12 year old and getting a super fund for him as i have read that if you put in $500/pa of super payments the Govt will match that with another $500 for low earners... I then just need to find him a job at Macca's or the Fish and Chip store where dad can get a staff discount or an extra pineapple fritter... Just have to make sure any fees and charges wouldn't eat all this up and more...

Someone said that they doubt that people are earning 7% on super, I'm with GESB in WA and the figures i have for the plan I am in are:
Actual returns last month (%) (Aug 2017) 0.44%
Actual returns FYTD (%) 0.73%
Actual returns 1 year (%) 6.77%
Actual returns 3 year (% pa) 6.39%
Actual returns 5 year (% pa) 9.34%
Actual returns 10 year (% pa) 5.51%

Which seem ok (getting close to 7%), the ones for the Growth plan are even higher except for the 10 year return... I think i might shift from the Balanced plan up to the Growth plan soon, just wanting to know how fast i can change plans if i see a bit problem coming down the pike...

 

[CaptJCool]

Wow. Great insights Jeffrey O'Neill!

Medicare was set up with one doctor, one receptionist, suburban house model.
The single entitlement model never was designed for consolidated corporate practices to fast-track wealth creation. Especially coupled with item billing. Why bill only one item when I could quite ethically bill three?

Re remote areas, its become obvious capital city Aussies don't in general want to be doctors out there. Cutting back the health costs will require some difficult choices.

 

[get me outta here]

Are these contributions appropriate also when a person already has 1.6m in super?

You could each go $125,000 /$325,000 this year of which $100,000 /$300,000 would get you no tax concession from the contribution. If you go that 3 year in one contribution the only benefit is the extra income earned is at a low rate in your super fund.