Superannuation Discussion + market volatility

[SYD]

No longer working for $$$

That’s a pretty narrow definition in the context of contributing to super.

You can stop “working for $$$” below preservation age and still be actively managing your finances (ie continue to top up super). “Self funded retirees” can live off other income before super kicks in.

Sadly, And therein lies a major reason why people can't imagine selling buying and moving which is never an easy process.

That’s part of the logic to treat “downsizing” differently - make it more attractive to sell.

You actually don’t need to “downsize” at all - just sell the existing home (and meet the age and timing conditions). You can actually buy something bigger and more expensive…

But doing something about State “stamp duty” would help people turnover property sooner and not have older folks stuck in unsuitable houses (ie steps etc).

 

[andye]

No longer working for $$$

However the ATO defines it differently:- essentially stopping work with no intention of working more than 10 hours a week

 

[Pushka]

However the ATO defines it differently:- essentially stopping work with no intention of working more than 10 hours a week

At the moment you make the decision to retire. I retired December 2019. Look what happened in Feb 2020. Share market tanked. I went back to work.

 

[SYD]

At the moment you make the decision to retire. I retired December 2019. Look what happened in Feb 2020. Share market tanked. I went back to work.

I was “restructured” in July 2019 (after 20+ years) but not far off my plan to “retire” anyway (But still 5 years before preservation age).

My cunning plan to do nothing but travel was short lived after being asked to do some consulting work in late 2019 - I didn’t need the money but as it turned out, it keep me from going stir crazy during Covid!

I took the market crash as an opportunity to switch to High Growth options in my super!

 

[burmans]

Define fully retired?

I’m sure 99.9% of “Self funded retirees” would probably disagree that you can’t contribute to super if no longer in the workforce.

Absolutely you can continue to contribute after retirement but more difficult once you hit 67.

 

[Quickstatus]

Absolutely you can continue to contribute after retirement but more difficult once you hit 67.

Sure, but once no longer working there is no SG, salary sacrifice.

 

[SYD]

Sure, but once no longer working there is no SG, salary sacrifice.

But you still have access to the same concessional cap that SGL and SS use. It’s just your own after tax dollars for which you can claim a tax deduction.

If you haven’t reached your total super contributions cap, you can also toss in large chunks of dollars each year as non-concessional contributions.

 

[burmans]

Sure, but once no longer working there is no SG, salary sacrifice.

That’s right but you can make a personal contribution and claim a tax deduction, aside from timing differences has the same effect tax wise.

 

[Quickstatus]

But you still have access to the same concessional cap that SGL and SS use

That’s right but you can make a personal contribution and claim a tax deduction

It is moot unless earning a taxable income whether through personal effort or through passive income.
If passive income is through fully franked dividends there is no taxable income
If no personal effort income there is no taxable income
If no taxable income, it is very silly to make a tax deduction on a super contribution as this will be taxed when transferred to beneficiaries.

 

[Quickstatus]

essentially stopping work with no intention of working more than 10 hours a week

There are other factors other than the ATO which decide when people stop working. But my point remains once fully retired there is no SG, salary sacrifice employee additional tax deductible contributions to top up a super fund. (Sure, if there a lotto win....

For most people where preservation of capital is important in retirement, their ability to earn an income where they can max out the Concessional cap from 10hrs a week is very limited.

Even for the medical profession, it becomes very difficult maintaining a registration even to just keep prescribing rights. many are just handing back their "shingle" rather than jumping through regulatory hoops, paying indemnity just to keep the right to prescribe. There is also cognitive decline. So, irrespective of what the ATO says or what people can technically do, there comes a point in time where work is no longer an option.

 

[Brissy1]

If passive income is through fully franked dividends there is no taxable income

Not sure what you mean by that.
I hope people apply their own situation if retired and <67.Eg (picking $ where the maths is simple)...

Say fully franked dividend income $35k + franking cr $15 k. Tax on $50k taxable income=$6788, so refund $8212.
C.f. transfer $30k into super and pay $4500 contribution tax, tax on $20k taxable income=$0 (? or close to zero,not sure about low income offset). Refund $15k, - $4500 = $10500 net "refund"

$2300 to be spent frivolously. And of course you can simply withdraw the net $25500 you put into super.