50+ Education Flyers for Advice Strategies
Version: FIN2.0.0
ADVICE CONTENT FOR SOA’S
Education Flyer – Gifting
In your retirement, you may like to make a gift to your children, a family member or a charity. If you receive the Centrelink Age Pension, there are limits on how much you can gift without impacting your Centrelink entitlements. In other words, you can make a gift, reducing your assessable assets, if it meets these requirements:
1. Less than $10,000 in a financial year; and
No more than $30,000 over a five-year rolling period (current year plus last 4 years).
What do you need to know about gifting?
Singles and members of a couple get the same threshold i.e. a couple combined has a limit $10,000 in one year or $30,000 over 5.
If your gift exceeds these thresholds, any amount over will be considered a ‘deprived asset’ and will be counted as an asset for means testing purposes.
Deprived assets will count towards your thresholds over the 5-year rolling period they relate to rather than new gifts only.
If the gift is returned, it will reduce the assessable deprived asset value (where applicable).
Inadequate consideration for the sale of an asset can be counted as a gift. The difference between market value and the consideration paid will be included.
Benefits:
Gifting cash or assets within the $30,000 over 5-year limits, will reduce your assessable assets and may increase your Centrelink entitlements.
If your Centrelink Age pension payment increases, you will have more income to help meet your everyday living costs.
You can assist family members / friends / charities by providing a gift within threshold limits and it won’t impact your Age pension payment.
Things to think about:
You will no longer have this cash at your disposal for spending.
You may only receive a small increase in your Centrelink payment relatively to the gift you make. The long-term value of this lump sum is potentially more than the additional payment you will receive.
Centrelink payments are subject to legislative change which may impact the amount of your entitlement in the future.
Important information regarding this flyer
The information in this flyer is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA. Care has been taken to provide up to date and accurate information relating to the subject area however <AFSL Name> <ABN> makes no representation as to its accuracy or completeness. Published: July 2022 ©Copyright 2022.
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Education Flyer – Spouse Contribution
If your spouse is a low or no-income earner, you can contribute money to their superannuation account. Making a contribution to their super can be an effective way to grow their retirement savings, while reducing your tax.
A spouse includes someone you are legally married to or in a de facto relationship with (including same sex partners).
Benefits of spouse contributions:
If your partner is earning a low income, or has taken time off work, it can be difficult for them to build up their retirement savings. By making an after-tax contribution, you're helping them grow their superannuation balance.
If you make after-tax contributions to your spouse's super and they earn less than $40,000 a year, you may be able to claim a tax offset of up to $540.
How the spouse super tax offset works:
The first $3,000 you pay into your spouse’s superannuation account as an after-tax contribution, you may be able to claim a tax offset of up to 18% (so, a maximum of $540). You don't receive the spouse contribution tax offset for payments above $3,000.
The amount you can claim depends on how much they earn annually:
Spouse Income
Tax Offset on a $3,000 contribution
$37,000 $540 $38,000 $360 $39,000 $180 $40,000 $0
Things to think about:
If you want to make contributions for your spouse, there are a few requirements you must satisfy:
Your spouse must be under age 67 (or meet the work test or work test exemption if they are aged 67 to 75).
Your contribution must be from after-tax dollars, and not from an employer or a trust.
You and your spouse must not be living separately on a permanent basis.
Your spouse must provide their TFN to their super fund.
You and your spouse must be Australian residents.
You aren't eligible to claim this tax offset if:
Your spouse has exceeded their non-concessional contributions cap for the financial year.
Your spouse's superannuation balance is $1.7 million or more on 30 June of the previous financial year in which the contribution was made.
Important information regarding this flyer
The information in this flyer is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA. Care has been taken to provide up to date and accurate information relating to the subject area however <AFSL Name> <ABN> makes no representation as to its accuracy or completeness. Published: August 2022 ©Copyright 2022
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Education Flyer – Investment Bond
An investment bond is a ‘tax-paid’ investment. If you satisfy the rules of the bond, no further tax will become payable as it has already been paid. This can be very attractive to those who pay a marginal tax rate above 30%.
Who is it suitable for?
High income earners wanting to save for a specific goal.
If you have reached your transfer balance cap in super and want to continue savings through other means.
If you want to have tax-effective savings pre-retirement.
If you are a trustee wanting to reduce your distribution of income requirements within a family trust.
If you want to transfer wealth to another individual, company or trust.
What are the rules?
If you hold your investment for more than 10 years from the original investment date, you do not pay any further personal tax on withdrawals made after this time.
You may make additions to your investment bond whilst maintaining your original investment date subject to the following 125% rule requirements:
You can contribute as much as you wish during the first year of your investment. However, subsequent years contributions are limited to 125% of the previous year’s contribution, to avoid restarting the 10-year tax period.
Important things to note with the 125% rule:
An investment year is considered each 12-month period from your investment’s original start date.
If you make an additional contribution in excess of the 125% limit, the 10-year period will start again for the entire investment.
If you do not make any contribution in a particular year, any contributions in following years will reset the 10-year rule.
If you wish to invest more than 125% of the previous investment year’s contributions, it may be more appropriate to start a new investment.
After the 10th year, earnings on each additional contribution receive immediate tax-free withdrawal status.
Benefits:
Income from your bond may be tax paid if you:
Hold the bond for 10 years
Do not make withdrawals
Meet the 125% contribution rule.
Bonds paid to beneficiaries directly will be tax free.
Bonds are most tax-effective when your marginal tax rate is above 30%.
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If your personal tax rate is below the life insurance tax rate of 30%, an excess tax offset may help reduce your tax on any other assessable income earned in the same tax year.
There are a wide range of investment options that will align with your risk profile.
Bonds are not normally subject to capital gains tax.
Bonds can be used to top up savings where super thresholds / caps have been reached. Things to think about:
To receive the tax benefits, you need to hold the investment for 10 years, not make withdrawals and not contribute more than 125% of the previous year contributions in any one year.
There will be fees payable for the establishment and ongoing management of the bond.
If you must redeem some or all of the investment bond prior to the completion of the tenyear period, the following tax will be payable:
o Within 8 years: all earnings are taxed at your marginal tax rate less a 30% tax offset.
o During the 9th year: 2/3rds of the earnings are taxed at your marginal tax rate less a 30% tax offset.
o During the 10th year: 1/3rd of the earnings is taxed at your marginal tax rate less a 30% tax offset
o Longer than 10 years: all withdrawals are tax free.
Important information regarding this flyer
The information in this flyer is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA. Care has been taken to provide up to date and accurate information relating to the subject area however <AFSL Name> <ABN> makes no representation as to its accuracy or completeness. Published: July 2022 ©Copyright 2022
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Strategy Flyer – Salary Sacrifice super contributions
Sacrificing some of your wage (salary) to contribute to super can mean you pay less tax and have more in your super account. The contributions are taken from your pay before you pay tax on them and then deposited to your super fund. These contributions are treated as concessional contributions in your fund and taxed at the super tax rate of 15% (30% if your income is over $250,000 p.a.).
The sacrificed component of your total salary package is not counted as assessable income for tax purposes.
How does it work?
A formal agreement is put in place between yourself and your employer to make the salary sacrifice contributions.
Your employer deducts the contributions from your salary.
The contributions are directed to your nominated fund.
All contributions are within the concessional contribution cap of $27,500 p.a.
You can use the catch-up contributions provision to contribute at a higher rate than the concessional cap. If your super balance is below $500,000 on 30 June of the previous financial year, you can carry forward any unused concessional contribution cap for up to 5 years (starting from 2017/18).
Benefits:
Adding more contributions to super will increase your savings for retirement.
These contributions will be made pre-tax and subject to a lower rate of tax in super of 15% (30% if your income is over $250,000).
Your employer will manage the payments for you.
Contributing your cash flow surplus before it is paid to you, reduces the likelihood of you spending it on other discretionary items.
If your balance is less than $500,000, you can carry forward unused concessional contributions for up to 5 years. This means that unused portions of your cap can be used in those future years.
Things to think about:
Not all employers offer this service, you need to check with them to make sure they can facilitate this arrangement. This agreement should be formal and in writing.
If your income is less than $37,000 p.a., there is little tax saving and therefore benefit, to salary sacrificing to super.
You must be eligible to contribute to super and meet the work test. Please see Education Flyer: Superannuation.
A concessional contribution cap of $27,500 p.a. applies.
Exceeding the concessional cap will result in additional tax payable.
You will not be able to access this money until you meet a condition of release such as retirement over preservation age
Wage increases may result in exceeding the cap.
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The Transfer Balance Cap for retirement income streams means that only $1,700,000 can be transferred at retirement. The remaining balance will need to stay in super.
Cash available for discretionary spending will reduce.
Important information regarding this flyer
The information in this flyer is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA. Care has been taken to provide up to date and accurate information relating to the subject area however <AFSL Name> <ABN> makes no representation as to its accuracy or completeness. Published: July 2022 ©Copyright 2022.
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