Super Women

RETIREMENT!  The very thought of it appeals to many hardworking persons.  They think about a time for doing the things that bring them pleasure, recreation and fun.  Sadly, many, in particularly women, will not have sufficient superannuation savings to fund the lifestyle they are hoping for in retirement.

On average, women retire with 39% less super than men and surprisingly an estimated 40% of older single retired women live in poverty in retirement.  This group of single retired women are the fastest growing cohort of homeless people in Australia.  What are the reasons for this?  Australia’s gender pay gap is currently 13.9% so on average, women earn less than men and since compulsory employer super is based on wages, women will have less in super in retirement.  Women are also more likely to take time off work for maternity leave and to care for their families.  As a result, a lower superannuation balance may mean a reliance on receiving a government pension.  For some, this may limit their independence and affect their quality of life.

Alan Lakein, a well-known author on personal time management said, “Planning is bringing the future into the present, so you can do something about it now.”

What little steps can you take now to prepare for the kind of retirement you want?

  1. CONSOLIDATION… Do you have multiple super funds?  If so, consolidating your super will likely reduce the management fees you are paying to different funds.
  2. INVESTMENT CHOICE IN SUPER… Most super funds allow you to choose from a range of investment options and asset classes.  These may include, growth, balanced, conservative and cash.  Do you know what investment options are available to you and have you reviewed how your super is invested?  Your investment choice will affect the earnings in your super and ultimately will impact the balance you have in super in retirement.
  3. INSURANCE IN SUPER… Most super funds offer life, total permanent and disability and income protection insurance for their members.  Premiums are deducted from your super to pay for your insurance cover.  Have you reviewed your level of insurance cover?  Do you know if you are over or under insured?  Do you know how much you are paying in insurance premiums for your cover?
  4. CONTRIBUTIONS… You can boost your super and get the power of compounding to work for you by making additional contributions.  If you make personal [after tax] contributions, you may be eligible for the super co-contribution and the low-income super tax offset of up to $500 each.  You can also salary sacrifice part of your salary and have it paid to your super fund.  By salary sacrificing to super, you may be able to reduce your tax because you are only paying 15% tax on your contributions you make rather than your marginal tax rate.  Salary sacrifice to super is considered employer contributions so its important to ensure that you don’t exceed the annual contribution cap of $25,000 for concessional contributions.  From 1 July 2019, if your super balance is less than $500,000 and your employer contributions have not exceeded $25,000 for the year, you are able to carry forward the unused part of the contribution cap for up to 5 years.  This may be a valuable opportunity for those who suddenly have a lump sum assessable income resulting from a disposal of a property.

If you would like to know more or come in for a free 30 minute appointment to speak to one of our team on how you can make the most of your superannuation, get in touch here!

 

Helen Yau – Manager + Financial Planner

CA, BCom, Dip Fp, SSA

Superannuation Nominations – Make It Legit!

Don’t be trapped by the pitfalls of superannuation nominations – make it legit!

Have your circumstances changed recently?  Have you married, separated, divorced, had kids, or are your kids now over 18 years old?  It may be time to consider and/or review your superannuation nomination.

A superannuation nomination is a notice to your superfund trustee outlining who you want to receive your superannuation benefits after your death.  However, your superfund trustee is only bound by a nomination that is valid [in accordance with superannuation laws].

Many superannuation funds will not guide you through what constitutes a valid superannuation nomination, which makes it all the more difficult.

So, what constitutes a valid superannuation nomination? Your superfund trustee will look at the following hierarchy of people when considering how to distribute your super:

  1. Your spouse or ex-spouse;
  2. Your children [or other financial dependents]; and
  3. Your Estate.

Let’s break these categories down a bit further…

1. YOUR SPOUSE OR EX-SPOUSE

It may seem common sense that a superfund trustee would pay your super benefits to your partner automatically.  And this is true, particularly if you have made a nomination directing the payment to your spouse.  However, if, since making the nomination, you have separated or divorced from your spouse, the nomination is not revoked and, in fact, remains valid. Thus, your benefits may be paid to an ex!

2. YOUR CHILDREN

The intention of superannuation is to fund the retirement of you and your dependents.  Accordingly, a spouse and children who are considered to be financially dependent upon you will receive the most beneficial treatment under superannuation law.  Your children who are under 25 or have a disability will be considered dependents.

You must be careful with nominations to children as there can be pitfalls, including:

  1. You cannot nominate nieces or nephews [invalid];
  2. If the children are under 25 and you have a spouse or an ex-spouse who is alive, that person will be considered the guardians and your super will be paid to them [to hold upon trust for your children until they attain the age of 18];
  3. Children who are over 25 are determined as not being financially dependent upon you, and if the super benefit is paid to them then they will be heavily taxed upon receiving the death benefit.
  4. The taxation consequences can be different for children depending on their ages at the time of your death, which will create an uneven division in real [net] terms;
  5. As long as your children are over the age of 18 years, the superannuation fund will pay an entitlement directly to nominated children, meaning you cannot protect that benefit for your children until they attain an older age.

If you intend for your super benefits to benefit your children, and any of the above issues are in concern in your current circumstances, one solution may be to nominate your Estate as the beneficiary [provided you have an up-to-date Will].  Your Will then controls the distribution of the super death benefits to your chosen beneficiaries and much can be done to reduce or avoid the tax consequences described above!

3. YOUR ESTATE

As mentioned, nominating your Estate is a great way to cover most pitfalls of superfund nominations.  Tax can be avoided or reduced where you have children under and over the age of 25, you can implement asset protection strategies for your personal and superannuation assets for your children, and you can distribute your super death benefits to third parties [who aren’t your spouse or child] through your Will.

The potential consequences of this option are that this can create a further delay between your date of death and the distribution of the superannuation death benefits, and it also has the effect of increasing the value of your estate.  If your Will is challenged after your passing, the superannuation benefits will form part of the asset pool which can be claimed against.  Some food for thought regarding the significant asset that is your superannuation.

So, maybe it’s time to review your superannuation nomination – and for the greatest benefit, we suggest reviewing it concurrently with your Will and Powers of Attorney.

Contact our Legal Team for an appointment to review your Estate Planning to find out how we can help.

 

Katherine Taylor – Solicitor

BCriminology [History], LLB

Financial Savvy

Mark it in your diaries ladies.. FRIDAY 31ST MAY + FRIDAY 21ST JUNE!

We are hosting a FREE seminar for women who would like some education on their finances + most importantly their financial security!

Our in-house Financial Planner, Samantha Butcher will be covering topics such as:

  • Women’s Money Challenges
  • Life Events + Women
  • Women’s Money Goals
  • The Need for Insurance
  • Tax Effective Ways to Contribute to Superannuation
  • Superannuation Beneficiaries
  • Superannuation Investment Options
  • Budgeting/Credit Card Debts
  • Wills + Powers of Attorney

Refreshments included + all children welcome!

LIMITED TICKETS VIA EVENTBRITE: https://www.eventbrite.com.au/e/financial-savvy-tickets-62243498981

Superannuation – Is It Still Worthwhile?

The constant changes to superannuation can be frustrating to many as they find it difficult to maintain their confidence in the superannuation industry.  Many have chosen to put the bare minimum into superannuation with their preference to build for their nest egg outside superannuation where they have full control and access without impact from the changes to superannuation.  However, is superannuation still a worthwhile consideration?

Currently, compared to other tax structures available, such as companies, trusts and partnerships, and personal tax, superannuation is still one the best tax structures available for many and should not be discounted.  All income in superannuation is taxed at a fixed rate of 15% and capital gains can be taxed as low as 10%.  If you commence receiving a pension for superannuation then all the income and capitals gains will be taxed at 0% up to the $1.6 million cap.

So are you taking full advantage of the changes to superannuation available to you?  Due to the many changes, it can be easy to overlook what you may be eligible for and what may impact you. Below are some things that may be relevant to you:

  • Tax Deduction for personal contributions – You may claim a tax deduction for personal contributions up to the concessional contributions cap of $25,000. Note, if you aged between 65-75 years you will need to meet a work test in order to claim a tax deduction.
  • Super Co-contribution – you may be eligible for a co-contribution of $500 if your total income is less than $37,697 and you make personal contribution of $1000 to your super. If your income exceeds $37,697 but is below $52,697, you will receive a reduced co-contribution.
  • Low Income Superannuation Tax Offset – a tax offset up a maximum of $500 is available to individuals with an adjusted taxable income of $37,000 or less. As long as your fund has received and reported a concessional contribution and you have lodged your tax return, the ATO will pay this directly to your superannuation account.
  • Low Income Spouse Tax Offset – a tax offset up to a maximum of $540 is available to individuals who make personal contributions to super on behalf of their spouse and their spouse’s income (including fringe benefits and reportable employer super contributions) is $37,000 or less. Where the spouse’s income is $40,000 or less but exceeds $37,000, a reduced tax offset is available.
  • Downsizer contributions – if you are aged 65 years or over and have sold your personal home, you may be eligible to make a downsizer contribution to your superannuation of up to $300,000 from the proceeds of selling your home.
  • Rolling 5 year concessional contributions – If you have a super balance of less than $500,000, you can make additional catch-up concessional contributions if you have not reached your concessional contributions cap in previous years. This applies from 1 July 2018.
  • Division 293 tax – high income earners pay an additional tax if their income exceeds $250,000. Income for the purposes of Division 293 tax includes taxable income, reportable fringe benefits, net financial investment/rental property loss, net amount of which family trust distribution tax has been paid, super lump taxed elements with zero tax rate.

If you have the long term goal to build for wealth and your retirement, superannuation should be considered as part of your financial plan.

If you would like further information on how to do this or would like to discuss a self-managed superannuation fund, please contact our team.

 

Helen Yau – Accountant Manager & Financial Planner

CA, BComm, Dip FP, SSA

Superannuation Beneficiaries and their importance

Not a lot of people are aware that superannuation is a non-estate asset. This means that it will not automatically be dealt with, through your Will if you were to pass away. It could be your wish that your partner receives your superannuation, and you could state in your Will that that is what you want to happen, but without a valid beneficiary nomination on your superannuation fund, the Trustee of the fund may grant your money elsewhere.

There are several varieties of nomination, including non-binding, binding, and non-lapsing binding beneficiary.

Nomination of Beneficiary

A ‘Nomination of Beneficiary’ is a direction that a member provides to the Trustee of the super fund in relation to distribution of his or her funds on death. It can be done by a simple one page document setting out the member’s preference and appropriately signed and witnessed.

A member can choose to make:

A Binding Nomination

  • The Trustees MUST pay the death benefit as nominated.

A Non-binding Nomination

  • The Trustees have the discretion to follow the stated wishes of the member or direct the entitlements to another person (or persons) or pay the entitlement directly to the Estate.

No Nomination

  • If you do not make any nomination, you are not breaking any Laws. The surviving Trustees simply have full discretion to distribute the funds to the Estate or any Dependent that they chose.

As important as it is to ensure that you have nomination made, it is important to make sure that it is a valid nomination.

 

Who can I nominate?

There are restrictions on who you can nominate under the Superannuation Industry Supervision Act (SIS). Valid nominations can be made to:

  1. The Legal Personal Representative in which case the benefit is paid to the Estate; or
  2. A dependant which is defined as follows:
  • Spouse (current or de facto or former spouse and can include same-sex and living with a person in a genuine domestic basis in a relationship as a couple);
  • A child of the member (including adopted, stepchild, ex-nuptial, child of your spouse);
  • Any other person with whom the member has an interdependency relationship, which covers persons where there is a close personal relationship and one or more provides the other with financial support, domestic support and personal care. We recommend seeking advice if you have circumstances that you think may qualify.

Common mistakes that we see are Nominations being made to parents, brothers or sisters or other relatives, but there is no interdependent relationship so the Nomination is invalid. A Nomination can have “if, then” clauses to allow you to nominate persons should certain beneficiaries have already passed away – such as “100% distribution to my spouse. If I survive my spouse, or if I divorce from current spouse, then distribute to my children on equal proportionate basis”.

So please ensure that you review your beneficiaries and ensure that they are the right type for your situation, and valid. If you would like to update your superannuation beneficiaries or have a chat to one of our financial advisors, we are always here to help. Please get in touch with our team.

 

Steve Reynolds – Certified Financial Planner

BComm, Dip.FS(FP)