Superannuation Discussion + market volatility

[Deleted member 29185]

Well, it's obvious that health insurance is more valuable to those people who use health services. It's not rocket science.

It's also obvious that health insurance is insurance rather than an outright investment (although dependent upon the future, it may actually be a great investment). Also, there are a myriad of options to choose and purchase according to ones need. That particular article demonstrated a writer and subjects who had absolutely no concept of what they had bought and then whined that it didn't suit them!!!! One so called expert was deliberately coy in his criticism. He asked about a particular medical condition (intussusception, a folding of the bowel... how many of you knew that??) and expected call centre staff could immediately answer him. I note he never actually stated whether he was able to ascertain the answer in the end. I suspect he did.

Another guru said private health insurance is a rip off (or words to that effect) and is a transference of wealth from the young to the old. Sometimes yes, sometimes no, that's the nature of insurance. That particular guru claims those over 60 are the winners. Rubbish. I'm not over 60 and my family (including my kids, all under 24) benefit greatly. In two weeks my daughter (23) will be having dental work that more than covers the premium (admittedly, paid for by my employer) and both my wife and I have had big claims this year and minor claims for my two other kids. I do agree though, the health insurance needs to be monitored for appropriateness of cover and it does need time spent studying what is available. That too is an investment. It's an investment of time for your future.

Like buying an 8G USB stick and then later deciding that you actually needed a 1Tb portable hard drive and whining about the original product!

 

[PDog]

It bugs that we pay for health insurance to avoid tax. We have a basic policy that we're unlikely to ever use, I'd rather that money go towards a public hospital than stupid ads on the radio / whatever.

But this is a thread about superannuation, so I'll be brief to not derail this any further. Do I feel ripped off? Nope. I just can't get worked up about the cost of or what we contribute to our health system when we have it so good compared to many, many others. (ok, the dental system needs work!)

ps nice pick up on that headline swanning_it!

 

[travelislife]

It bugs that we pay for health insurance to avoid tax. We have a basic policy that we're unlikely to ever use, I'd rather that money go towards a public hospital than stupid ads on the radio / whatever.

A very, very good point.

 

[JohnK]

Why is Superannuation so confusing?

Called MLC last week about making a contribution to my MLC Superkey account.

"I would like to make a $15,000 payment to my account. Do I pay by cheque?"

"You can BPay the amount."

"Ok. Will you take out the 15% contribution tax?"

"No. You are making a voluntary contribution."

"Yes but I can pay contribute up to $25,000/year tax free right?"

"Only if you salary sacrifice. Everything else is a voluntary contribution!"

The conversation went around and around in circles. He even spoke to someone else to confirm his advice.

Have I misunderstood that I can top up my superannuation up to $25,000/year and claim a tax deduction? I'm sure we discussed it at length in this thread.

 

[dec540]

Why is Superannuation so confusing?

Called MLC last week about making a contribution to my MLC Superkey account.

"I would like to make a $15,000 payment to my account. Do I pay by cheque?"

"You can BPay the amount."

"Ok. Will you take out the 15% contribution tax?"

"No. You are making a voluntary contribution."

"Yes but I can pay contribute up to $25,000/year tax free right?"

"Only if you salary sacrifice. Everything else is a voluntary contribution!"

The conversation went around and around in circles. He even spoke to someone else to confirm his advice.

Have I misunderstood that I can top up my superannuation up to $25,000/year and claim a tax deduction? I'm sure we discussed it at length in this thread.

There’s a form called a ‘notice of intent to claim or vary a deduction for personal super contributions’. Typically these are completed after the end of the financial year, but before a tax return is lodged.

This will result in the contribution being classified as a personal deductible (concessional) contribution and the 15% contribution tax being deducted.

The contribution can then be claimed as a tax deduction in a personal tax return.

The benefit of this is that the tax isn’t deducted for a number of months (so interest can be earned in the interim) and it is far easier if the contributor is aiming to have personal and employer contributions add up to $25k for the year.

Hope that helps!

 

[burmans]

Why is Superannuation so confusing?

Called MLC last week about making a contribution to my MLC Superkey account.

"I would like to make a $15,000 payment to my account. Do I pay by cheque?"

"You can BPay the amount."

"Ok. Will you take out the 15% contribution tax?"

"No. You are making a voluntary contribution."

"Yes but I can pay contribute up to $25,000/year tax free right?"

"Only if you salary sacrifice. Everything else is a voluntary contribution!"

The conversation went around and around in circles. He even spoke to someone else to confirm his advice.

Have I misunderstood that I can top up my superannuation up to $25,000/year and claim a tax deduction? I'm sure we discussed it at length in this thread.

I think you are confusing a voluntary after tax payment with salary sacrifice. If you pre-arrange with your employer and they contribute extra money (from your before tax salary) this pre-tax salary sacrifice is taxed at 15% up to a total of $25K. This 25K is calculated as the sum of payments your employer is making (compulsory super) and salary sacrifice amounts.

There is a small exception to this if you are self employed and I think this is what dec540 is referring to.

You can separately make a voluntary contribution of 25K but this will be from after tax funds (and why would you want to be taxed again on this?).

 

[JohnK]

Sorry but this is all extremely confusing.

Let's say my Superannuation guarantee payment is $10,000/year. I don't want to salary sacrifice but I want to pay another $15,000 into my superannuation account up to the $25,000 limit. I don't want to make additional voluntary payments into super above $25,000.

Does my taxable income for the year reduce by the $15,000 I paid into super? If not then I need to setup salary sacrifice of $15,000 for this financial year and half the year is gone already.

 

[dec540]

Sorry but this is all extremely confusing.

Let's say my Superannuation guarantee payment is $10,000/year. I don't want to salary sacrifice but I want to pay another $15,000 into my superannuation account up to the $25,000 limit. I don't want to make additional voluntary payments into super above $25,000.

Does my taxable income for the year reduce by the $15,000 I paid into super? If not then I need to setup salary sacrifice of $15,000 for this financial year and half the year is gone already.

There are two types of personal contributions. Personal contributions automatically default to after tax until you lodge the notice of intent to claim form mentioned in my previous post.

So long as you submit that form correctly it converts to a pretax contribution and reduces your taxable income for the year it was contributed within.

Hope that makes it easier. If not it would be worthwhile having a chat with your accountant / adviser regarding it.

 

[JohnM]

Sorry but this is all extremely confusing.

Let's say my Superannuation guarantee payment is $10,000/year. I don't want to salary sacrifice but I want to pay another $15,000 into my superannuation account up to the $25,000 limit. I don't want to make additional voluntary payments into super above $25,000.

Does my taxable income for the year reduce by the $15,000 I paid into super? If not then I need to setup salary sacrifice of $15,000 for this financial year and half the year is gone already.

Yes - just plonk the money into your super fund when ready - most people would do it in mid June I would expect. To the super fund it's some sort of contribution at that point.

But to get it tax deductible you must fill in the 'intent to claim' form, submit it to your super fund, have them sign it and return it to you - all of that before you complete your tax return. That matches the data back to the ATO to validate the deduction - and presumably verify that you have not exceeded the $25K cap.

Until the recent changes, you needed to be self-employed to do this (or salary-sacrifice to boost your super contribution). Now, anyone can supplement SG or salary sacrifice to get to the $25K limit. (Over 65s need to satisfy the work test of 40h in any 30 day period).

 

[JohnK]

Hope that makes it easier. If not it would be worthwhile having a chat with your accountant / adviser regarding it.

Understood. Thanks. Don't understand why MLC are providing the wrong advice.

 

[JohnM]

You may find this site useful: SuperGuide - Simple superannuation and retirement planning information. Of course, the ATO is useful but make sure you don't look at older rules as the significant changes came into effect in the current fiscal year.

IMHO it is better to do your own research to get these things as clear as possible in your own mind before asking a phone-answering person. They may - or may not - have good awareness (or the ability to explain it). If you already have reasonable understanding, you will at least have some idea of whether they know what they are talking about.

 

[Milboo]

My employer super fund is a defined benefits fund - very simply is this a good or bad thing? Currently I have about 1/3 of my super in Asgard and 2/3 is the the DB Fund.

I had been thinking of rolling the Asgard fund into the DB one so it is all in one place, but frustratingly the online ATO portal through MyGov won't let me do it and to do it manually means hunting down information I don't know the location of!

 

[dec540]

My employer super fund is a defined benefits fund - very simply is this a good or bad thing? Currently I have about 1/3 of my super in Asgard and 2/3 is the the DB Fund.

I had been thinking of rolling the Asgard fund into the DB one so it is all in one place, but frustratingly the online ATO portal through MyGov won't let me do it and to do it manually means hunting down information I don't know the location of!

Very generally speaking, defined benefit funds are very good and are to be kept at almost all costs. The reasoning is that the benefit is a calculation generally based upon your final average salary and years of service. It’s often not linked at all to stock market performance, or if it is you generally get the better of 2 calculations. I.e. providing a guaranteed benefit regardless of markets.

You won’t typically be able to make contributions or rollover funds into a defined benefit account, given the above.

Depending on the scheme, upon retirement or ceasing work, you may either end up with a lump sum within super which can be invested per your wishes, or you may potentially be able to convert it to a pension for life.

They all differ and I’ve seen instances where delaying a retirement date by as little as 1 month increased a guaranteed pension for life by around $3k per year!

Long story short, seeking advice from an adviser who knows the right questions to ask and isn’t aligned with a super fund or other financial institution is generally a very wise idea.

If someone tries to tell you to close the defined benefit pension. Make sure you understand exactly the reasoning why, and if you don’t agree with absolutely everything, please get a second or even third opinion - especially if closing the account results in a fee for whoever is providing the advice. There’s too many people praying on those with these pensions.

Feel free to PM if you want more info.

Note, this is general info only and not personal advice.

 

[Milboo]

Thank you!

Another question if I may - what happens when I leave the company? This will happen and I'm still 30 years off retirement!

 

[dec540]

Thank you!

Another question if I may - what happens when I leave the company? This will happen and I'm still 30 years off retirement!

No worries. It typically gets converted into a lump sum which can then be consolidated with your other superannuation assets and invested per your instructions. If you don’t nominate, it’s often invested in a default fund.

I stress this is what typically happens and there’s a raft of both public and private sector DB schemes, all with their own quirks.

I’d recommend looking into exactly how the calculation works as there may be benefit to timing your resignation date based upon this calculation (assuming you have the option).

 

[JohnK]

IMHO it is better to do your own research to get these things as clear as possible in your own mind before asking a phone-answering person. They may - or may not - have good awareness (or the ability to explain it). If you already have reasonable understanding, you will at least have some idea of whether they know what they are talking about.

It is so difficult to keep track.

I have setup $220/week salary sacrifice. That and SGC should get me close to $20,000 from next June onwards. I may need to make that salary sacrifice $330/week but quite happy to top up the remainder once a year.

Not sure what to do this year as I'll be a long way short of $25,000.

 

[dec540]

It is so difficult to keep track.

I have setup $220/week salary sacrifice. That and SGC should get me close to $20,000 from next June onwards. I may need to make that salary sacrifice $330/week but quite happy to top up the remainder once a year.

Not sure what to do this year as I'll be a long way short of $25,000.

Here’s what I’d do.

1. Call my super fund in early June and ask for a total of concessional contributions received FYTD and my employer’s contribution frequency / last contribution (I.e. determine whether there’s any more contributions coming or not)
2. Calculate $25k minus anticipated contributions
3. Make a personal contribution for this amount, prior to my super fund’s cut off date
4. Complete notice of intent to claim.... form
5. Lodge tax return and claim the personal deduction with my accountant

Simples

 

[Milboo]

Thanks! I think I will need to find an adviser - I've looked through my annual statement and online details and can't find that key information the timing.

Now I understand why we have such a hassle when we divest and have to get actuarial reports for transferring employees!

 

[sinophile888]

My husband has a defined benefit superannuation scheme from when he worked for the Federal Government. He left it there for 18 years after he moved to a non government job and then retired. It has very generous conditions and we now use the money for travel. I could have left a small amount there when I left the government in my late 20s but cashed it out to put money towards buying a car.

How I regret that decision now.

 

[travelislife]

Understood. Thanks. Don't understand why MLC are providing the wrong advice.

Remember the rule has only just changed this FY to allow you to contribute directly and claim the tax deduction having the exact same result as salary sacrifice. You probably just had some numpty on the phone who isn’t up to speed with the changes.