Tag: investments

superannuation services

Implications of the proposed $3M Super Tax

Posted on | by Allan Hall

Understanding the Implications of the Proposed $3M Super Tax

As the proposed tax on superannuation balances exceeding $3 million draws nearer, individuals potentially affected by this measure are urged to assess its implications thoroughly.

While not yet enacted into law, the Division 296 tax warrants careful consideration in investment strategies, especially concerning end-of-financial-year contributions into super.

  • For those affected, a strategic reassessment may be necessary, considering whether high-growth assets should be held within superannuation, given the potential tax implications
  • Individuals may need to reconsider investment vehicles, balancing tax effectiveness with asset protection
  • Estate planning and succession plans for Self-Managed Superannuation Funds (SMSFs) will require revisitation post-implementation of Division 296 to mitigate unnecessary tax burdens on beneficiaries.

Division 296 legislation proposes an additional 15% tax on investment earnings of super accounts with total super balances (TSB) exceeding $3 million at the end of the financial year.

It’s important to note that this extra tax applies only to the portion exceeding $3 million.

Key aspects of the legislation include the concept of Adjusted Total Super Balance (ATSB), which determines the $3 million threshold. The ATSB calculation by the Australian Taxation Office (ATO) considers the market value of assets regardless of realisation, significantly affecting super funds holding property or speculative assets. Additionally, the legislation introduces a new formula for calculating ATSB for Division 296 purposes.

Under Division 296, deemed earnings exceeding the $3 million threshold will be apportioned and taxed accordingly. Negative earnings in such instances may be carried forward to offset future liabilities.

For those unaffected by Division 296, super remains an attractive option for retirement savings. Making additional contributions prior to EOFY presents an opportunity to maximise savings through various avenues such as concessional and non-concessional contributions, salary sacrifice arrangements, and downsizer contributions.

The draft Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, introduced to Parliament in 2023 is currently under scrutiny by the Senate Economics Legislation Committee, with a report expected next month. If passed and granted Royal Assent, Division 296 will come into effect from July 2025.

This forthcoming regulation represents a substantial change to superannuation rules, particularly impacting members with significant account balances. Given its complexity, seeking professional advice is crucial for informed decision-making concerning super and wealth creation strategies in the upcoming years.

CONTACT ALLAN HALL SUPERANNUATION

Further reading

SMSF Association stands against new tax as debate looms
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cash in a hessian sack

SMSF record-keeping best practices

Posted on | by Allan Hall

ATO reminds SMSFs to keep good records

How self-managed super fund (SMSF) trustees can meet their responsibility to keep accurate tax and super records.

Keeping good records

Keeping good records is more than just knowing which records to keep and for how long. It involves having a system for organising and maintaining records that makes it easier for you, and any SMSF professional you use, to:

  • complete the fund’s independent audit each year
  • lodge your fund’s annual return.

It may also help reduce audit and administration costs for your fund.

To help keep your records organised, you may want create separate files for your fund’s more permanent records, and for records that relate to a specific financial year.

For example, in your permanent file you may want to keep:

  • the fund’s trust deed
  • the fund’s investment strategy
  • details of the regular reviews of the fund’s investment strategy, including the consideration of insurance for members of the fund
  • reasons for decisions on the storage of collectables and personal use assets
  • minutes of trustee meetings
  • all signed trustee declarations
  • records of trustees consenting to their appointment as a fund trustee
  • records of all changes in fund members and trustees.

As each SMSF is unique, with its own investment strategies to achieve its objectives, you should consult with a professional licensed adviser when setting up a record-keeping system that suits your fund.

Keeping all relevant records together will simplify the process of compiling the records you need to give to your fund’s independent auditor. If your fund regularly holds trustee meetings, you could create a separate folder for them, and sort them by date.

Take minutes of all investment decisions

You should take minutes of all investment decisions, including:

  • why a particular investment was chosen
  • whether all trustees agreed with the decision.

This is because if you, as one of the fund’s trustees, invest the SMSF’s money in an investment that fails, the other trustees could take action against you for failing to be diligent in your duties.

However, if your investment decision was recorded in meeting minutes signed by the other trustees, you will have a record to show that they agreed with your actions.

Signature requirements for financial statements

Under Australia’s super laws, SMSF trustees must sign their SMSF’s financial statements before finalising their annual audit. This includes an operating statement and a statement of financial position which must be signed by the required number of trustees or directors of the corporate trustee.

Minimum record-keeping requirements

The most important reason for keeping good records is that it’s a legal requirement for you to do so. You may also need to provide accurate records to us if we ask to see them.

You need to keep any SMSF records for a minimum of 5 years.

Despite what you may have heard or read elsewhere, you cannot access your super before you retire unless you meet one of the very few exceptions to this fundamental rule of super law. Read more »

CONTACT ALLAN HALL SUPERANNUATION

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Allan Hall Financial Planning team with Mark O'Connell in centre

Allan Hall Financial Planning retirement

Posted on | by Allan Hall

Mark O’Connell Farewelled after a Decade of Outstanding Service

As the curtains drew to a close on 31 December 2023, the Allan Hall Financial Planning team bid a fond farewell to one of its senior advisors, Mark O’Connell, who retired after an illustrious 10-year career with the company.

Mark’s invaluable contribution to the financial planning team has left an indelible mark on Allan Hall, and his retirement is celebrated as a well-deserved culmination of a successful career.

During his time, Mark played a pivotal role in shaping the success and growth of Allan Hall Financial Planning. His dedication and expertise were instrumental in establishing the firm as a trusted name in financial advisory services and the team is grateful for the wealth of knowledge and experience he brought to the table.

The Allan Hall Financial Planning team, now under the capable leadership of Robin Bell, consists of three advisers and three support staff, all of whom boast extensive knowledge and experience in the financial services industry. The team prides itself on its commitment to providing comprehensive financial planning advice, covering areas such as wealth accumulation, retirement planning, wealth protection, superannuation, investments, and personal and business insurance.

Over the last 12 months, Mark’s valued clients have undergone a seamless transition to two highly qualified advisers within the team — Martin Cimino and Angelo Adam. Martin, who joined the team in February 2023, brings a wealth of experience from a successful stint as a partner/director of a financial planning company, where he also served as a Senior Private Wealth Adviser since 2010. Angelo, an adviser since 2019, has been instrumental in assisting clients with their personal insurance needs.

Allan Hall Financial Planning takes pride in its diverse and loyal client base. Situated in the ‘Lifestyle Working’ building in the heart of Sydney’s Northern Beaches, the office provides a modern and inviting environment for both clients and employees. The open-air meeting spaces and light-filled offices foster innovation and vitality in the workplace, making it an ideal setting for client interactions.

As an integral part of Allan Hall Business Advisors, the financial planning team collaborates closely with accountants, tax advisors and SMSF specialists. Acting as a ‘financial coach,’ the team ensures that clients’ financial and lifestyle goals are thoroughly understood and met across various areas. This holistic approach sets Allan Hall Financial Planning apart, making it a trusted partner in guiding clients through their financial journey.

Mark O’Connell’s retirement may mark the end of a chapter, but the legacy of his contribution endures as Allan Hall Financial Planning continues its commitment to excellence and client satisfaction. The team looks forward to the future, building upon the foundation laid by Mark and embracing new opportunities for growth and success.

CONTACT ALLAN HALL FINANCIAL PLANNING

11 facts about superannuation

11 Tax Facts About Superannuation

Posted on | by Allan Hall

Compared to other investment structures, super is widely considered to be one of the most tax-effective investment structures available from a wealth accumulation and cash flow generation perspective.

Although not a comprehensive list, below are 11 of the top tax facts about super.

Please note: Each tax fact isn’t covered in detail (only a brief snapshot is provided), other important considerations go with each. For example, it’s important to consider things such as contribution eligibility, and conditions of release. To discuss how any of the below may be relevant to your situation, talk to your Financial Adviser.

Super investment structure

Overview

When investing via super, it’s important to understand that there is an accumulation phase and a retirement phase. From a life stage perspective:

  • Accumulation phase generally coincides with the time in your life where contributions are being made to your super, and you are accumulating wealth via these contributions and investment earnings. Nearing retirement, some of us may commence a transition to retirement income stream (TRIS).
  • Retirement phase generally coincides with the time in your life where you are using the wealth you have accumulated to help fund your retirement lifestyle via either a retirement income stream, lump sum withdrawals, or a combination of both.

With the above in mind, from a tax perspective, the tax facts listed below are grouped according to their relevance to each phase. For example, the tax facts regarding contributions are underneath the title ‘Super (accumulation phase)’, as contributions can’t be made to a super account in retirement phase.

Super (accumulation phase)
  1. Investment earnings in your super. Investment income is generally subject to a maximum of 15% tax. And, capital gains on assets held for longer than 12 months receive a 1/3 (33%) tax discount, which effectively reduces the tax rate to 10%.
  2. Concessional (pre-tax) contributions to your super. The amount contributed is reduced by a tax of 15% (contributions tax). When considering salary sacrifice and personal deductible contributions (types of concessional contributions), this tax of 15% may be lower than your marginal tax rate. Please note:
    1. If you have income and concessional contributions totalling more than $250,000, you can pay an additional 15% tax (called Division 293 tax) on some or all of your concessional contributions.
    2. If you have adjusted taxable income of $37,000 or less, you may be eligible to receive the low-income super tax offset (up to $500).
    3. Making concessional contributions to pay for premiums for certain insurance held through super can reduce contributions tax.
  3. Non-concessional (after-tax) contributions to your super. The amount contributed isn’t reduced by a contributions tax. Please note:
    1. If you have total income less than $54,837, you may be eligible to receive the Government co-contribution (up to $500).
    2. If you make a spouse contribution (i.e. non-concessional contribution to your spouse’s super), you may be eligible to receive the spouse contribution tax offset (up to $540). The receiving spouse’s income must be less than $40,000.
  4. Insurance in your super. Your super fund trustee can generally claim the insurance premiums as a tax deduction, reducing the tax paid by your super fund trustee on your concessional contributions and super earnings. The tax saving is often rebated to your super account, effectively reducing the premium cost by 15%.
  5. Saving for a home deposit via your super. If you make voluntary contributions, you may be eligible to withdraw all or part of these contributions plus associated earnings for use as a deposit via the First Home Super Saver Scheme. Please note:
    1. The maximum amount that can be withdrawn is $15,000 of voluntary super contributions per financial year made since 1 July 2017 (up to a total of $30,000 across all years). The amount that can be withdrawn is 100% of eligible non-concessional contributions, 85% of eligible concessional contributions, plus 85% of associated earnings. Tax is payable on the associated earnings and concessional contributions portion of the withdrawal (taxed at marginal tax rates, including the Medicare Levy, less a 30% tax offset).
  6. Small business capital gains tax (CGT) concessions. If you are considering selling a small business or the assets it uses, you may be eligible for CGT concessions that help reduce the taxable capital gain associated with the sale, and build your super retirement nest egg in the process. Please note:
    1. You may be able to contribute amounts from the CGT 15-year asset exemption and retirement exemption to your super, without using your non-concessional contributions limits.
  7. Pension payments from your super. Pension payments from an accumulation phase transition to retirement income stream (TRIS) are generally tax-free if you are aged 60 or over. If you are under age 60, the taxable portion of pension payments is taxed at your marginal tax rate, less a 15% tax offset.

    Super (retirement phase)
  8. Investment earnings in your super. Investment income and capital gains are generally tax-exempt. Please note: The transfer balance cap, which is currently set at $1.6 million (indexed) per person, limits the amount of super benefits that can be transferred to retirement phase.
  9. Pension payments from your super. Pension payments received from a retirement income stream (eg account-based pension or retirement phase TRIS) will be tax-free to you if you are aged 60 or over at the time of receiving the pension payment.

    Super (accumulation or retirement phase)
  10. Lump sum withdrawals from your super. Any lump sum withdrawals made after 60 years of age are generally tax-free. If you make a lump sum withdrawal and you are aged between preservation age and 60, the taxable component of the lump sum is taxed as follows:
    1. The amount up to the low rate cap amount (currently $215,000) is tax-free.
    2. The amount above the low rate cap amount is taxed at 15% (plus the Medicare Levy).
  11. Passing away and your super:
    1. A death benefit lump sum paid to a nominated beneficiary who is a tax dependant is received entirely tax-free. If the beneficiary is a tax non-dependant, then any tax-free component is tax-free, but the taxable component is taxed at 15% (taxed element) or 30% (untaxed element), plus the Medicare Levy.
    2. Income payments from a reversionary death benefit income stream paid to a nominated reversionary beneficiary who is an eligible pension recipient dependant are received entirely tax-free if you or the reversionary beneficiary are aged 60 years or over at the time of your passing. If both you and the reversionary beneficiary are under 60 at the time of your passing, the pension payments from the reversionary death benefit income stream are taxed as follows:
      1. the tax-free component is tax-free, and
      2. the taxable (taxed element) component is taxed at marginal tax rate plus Medicare Levy, less 15% tax offset.

However, when the reversionary beneficiary turns 60, the pension payments from the reversionary death benefit income stream are tax-free.

Talk to us

Each tax fact outlined above isn’t covered in detail (only a brief snapshot is provided) and other important considerations go with each. For example, it’s important to consider things such as contribution eligibility, and conditions of release. To discuss how any of the 11 tax facts about superannuation may be relevant to your situation, give us a call. We would love to hear from you!

CONTACT US

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.

Is super worth the hype?

Is Super Worth the Hype?

Posted on | by Allan Hall

As Financial Advisers we talk about superannuation a lot.

So much so that it probably becomes a fuzzy word people don’t even hear any more. And the younger you are, the less interested you probably are. 

But superannuation is super important. It is likely to be the biggest investment you will have in your lifetime, unless you own a mortgage-free home.

It’s also what will keep you afloat when you retire – which for some of us is a choice, for others it’s a choice made for us due to illness, or the inability to continue to carry out our normal work duties or due to financial hardship.

Without a regular deposit of wages or salary into your bank account, how will you afford to pay your bills, buy food and clothes and keep your car running? Have you have been lucky and wise enough to establish a few back-up options during your working years? 

The Association of Superannuation Funds of Australia’s (ASFA) estimate of how much money you’ll need in retirement, depending on your lifestyle is in the table below. This is how much it estimates you need to have every single year you are retired.

ASFA Retirement StandardAnnual living costs
Couple – modest$40,829
Couple – comfortable$62,828
Single – modest$28,254
Single – comfortable$44,412
Source: ASFA Retirement Standard, for those aged around 65 (March quarter 2021, national)

There are also guidelines for the lump sum couples and singles need sitting in their superannuation account upon retirement for a comfortable lifestyle. These guidelines assume that the retiree/s will draw down all their capital, and receive a part Age Pension – which not everyone is eligible for, so it’s recommended you speak to your Financial Adviser about your situation.

CategorySavings required at retirement
Couple – comfortable$640,000
Single – comfortable$545,000
Source: https://www.superannuation.asn.au/ArticleDocuments/269/ASFA-RetirementStandard-Summary-2018.pdf.aspx?Embed=Y All figures in today’s dollars using 2.75% AWE as a deflator and an assumed investment earning rate of 6 per cent

If you know what your superannuation balance is currently, how old you are and approximately how many working years are left, you can use the above tables to figure out how you are tracking in terms of reaching a comfortable super balance to live a comfortable retirement lifestyle. Keep in mind these are averages and estimates. You, as an individual, may have higher needs, greater expectations of your retirement lifestyle, a desire to retire early or be disadvantaged by not receiving super when you have taken time out of the workforce to have children – all of these factors will impact the amount you will need tucked away in superannuation.

With all this information, what can you do about increasing your superannuation balance so you hit your target by retirement age? If you are currently employed you would be receiving the super guarantee from your employer which for many years was paid at 9.5% of your salary (unless you have an employer that pays above minimum, lucky you!) and rose to 10% on 1 July 2021. It is set to rise again to 10.5% on 1 July 2022.

In addition to the superannuation guarantee there are other options you can consider if you are eligible such as government co-contributions to super, spousal contributions, contribution splitting and the low-income super tax offset. Your Financial Adviser can have a conversation with you about how these strategies may help you increase your super balance.

Hopefully, this article has provided some useful information, and you’re hyped up to take greater notice of your super balance because when your working days are over, it’s going to really matter to you.

If you would like to discuss super strategies, or review your financial plan, we would love to hear from you.

CONTACT US

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.

Helping your children financially

Helping your children, financially speaking

Posted on | by Allan Hall

As a parent you probably have great expectations for your children

They will have everything you had and more! You will consider their every need and make the most of every opportunity to help them get ahead, right?

Whilst every parent wants their child to be healthy, happy and financially secure, figuring out how to get them there is another thing.

Working with a financial adviser can help you understand options available to financially help your children, and teach them how to take control of their financial future once it is time for you to step out of the equation, and them to step up. Introducing these discussions as a family from early on means you can get help for your children that will serve them well into their future.

Savings

It’s never too early to start a good savings system. If your child gets pocket money for helping out around the family home, birthday money and other small contributions, you can help them divert some of this into savings and some into spending.

Superannuation

Once your child begins work they’ll be asked what super fund they want their employer to make compulsory contributions to. Starting working life with a super fund that charges low fees and delivers high returns will make a HUGE difference over their working lifetime. If your child understands what superannuation is and the power of it to build a nest egg, they are going to be much better off in the long run.

Investments

Many parents want to contribute to a savings or investment fund for their child, if they can afford to do so. A financial adviser can help you to understand the fees, costs and returns of a number of different investment options including investment bonds, trust funds and savings accounts.

Don’t let uncertainty hold you back — talk with us

If you are unsure about the true value of advice but you want to explore whether it might help you reach – or exceed – your financial goals, book a conversation with a Financial Advisor about getting a plan in place.

We have the capacity to take on new clients and welcome the opportunity to meet with you.

CONTACT US

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial advisor.

Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323.