Tag: Superannuation

Are grandparents giving too much?

Written by Sydney Financial Planning on 28 February 2020. Posted in Financial Strategies. No Comments on Are grandparents giving too much?

Not so long ago, it was the norm for adult children to lend a financial helping hand to their ageing parents. These days, the support is more likely to flow downwards, and grandparents are increasingly likely to provide financial support to their children – and even grandchildren.

As school costs soar for instance, a growing number of grandparents are dipping into their pockets to give their grandchildren a quality education. Industry research shows almost one in four education savings plans are started by people aged 60 or older.ⁱ

In other families, time rather than money is being provided. Faced with expensive and often limited formal childcare options, many working families turn to grandparents as a source of low cost childcare. A 2014 report by AMP and the National Centre for Social and Economic Modelling (NATSEM)ⁱⁱ found that grandparents provide 23% of all childcare to children aged under 12.

Informal childcare can be taxing

Quite naturally, many grandparents relish the opportunity to spend one-on-one time with their grandkids. However, along with the physical demands of caring for a youngster, providing childcare can also be financially taxing, and it’s not just about occasional outings to the zoo or the purchase of a few age appropriate toys.

At a time when the pension eligibility age is being raised and pension rates reduced, caring for a grandchild can have a significant impact on a grandparent’s financial wellbeing.

One in five have changed jobs to offer childcare

A survey by National Seniors Australiaⁱⁱⁱ found many grandparents who provide informal childcare are ‘working around care’, and making significant adjustments to their own career as a result. Among those surveyed, 70% altered the days or shifts they worked, 55% reduced their working hours, and 18% had even changed their job because of their caring commitment.

On the plus side, the same study found grandparents reported enjoying a far better relationship with both their grandchild and adult child as a result of providing care. But it comes at a cost. Just over one-third (34%) of respondents said their childcare responsibilities had a negative impact on their incomes, household budgets and/or retirement savings.

It’s all about finding a balance

These results highlight the need for seniors to find a balance in how – and how much – they help their adult offspring and grandchildren.

We all want the best for our family but as we age we need to think about our own needs too. Increasing longevity means longer retirement periods to plan for, and giving too much today could limit your ability to remain financially independent throughout retirement.

Having open and frank discussions with your adult children about the level of support you can realistically provide – both physical and financial – is the starting point in achieving this balance. These may not be easy conversations to have but they are critical to achieve a win-win for all family members.

Speak to us about the best way to structure your finances so you can help your adult children while still achieving your retirement goals.

Need help structuring your finances so you can help your children?

Speaking with one of our financial advisors is a good place to start. Make a booking or call us on 02 9328 0876 to arrange a meeting.

i Australian Unity media release: Grandparents step in to fill the education savings gap, 31 October 2014
ii AMP.NATSEM Income and Wealth Report, Child Care Affordability in Australia, Issue 35 – June 2014.
iii National Seniors Australia, Grandparent childcare and labour market participation in Australia, September 2015

General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.

Super investment options – what’s right for you?

Written by Sydney Financial Planning on 26 January 2020. Posted in Superannuation. No Comments on Super investment options – what’s right for you?

If there’s one thing certain in life it’s change. And generally your attitude towards saving and investing will change as you get older.

How your super is invested when starting your first job may not be the right approach when you’re approaching retirement. Luckily you can change your investment options at any time and this could make a real difference to how much money you have when you retire.

There are usually several different investment options to choose from. If you haven’t selected an investment option, you’re probably invested in your fund’s default option, which will generally take a balanced approach to risk and return.

To get up to speed on your super investment options, we’ve answered three common questions: how your money is invested, the different options available, and how your stage of life may influence your preferences.

What do super funds do with my money?

Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%. Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.

Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.

If you’re not sure what you’re invested in, contact your super fund. You may also be able to see your current investment option by logging into your super fund’s online portal – this may also give you a current balance and other information such as your projected super savings over a lifetime.

What are the super investment options I can choose from?

Most super funds let you choose from a range, or mix of investment options and asset classes. These might include ‘growth’, ‘balanced’, ‘conservative’ and ‘cash’ but the terms can differ across super funds. Here’s a small sample of the typical type of investment options available:

Growth options aim for higher returns over the long term, however losses can also be notable when markets aren’t performing. They typically invest around 85% in shares or property.

Balanced options don’t tend to perform as well as growth options over the long term, but the loss is also less when there are market downturns. They typically invest around 70% in shares or property, with the rest in fixed interest and cash.

Conservative options generally aim to reduce the risk of market volatility and therefore may generate lower returns. They typically invest around 30% in shares and property, with the rest in fixed interest and cash.

Cash options aim to generate stable returns to safeguard the money you’ve accumulated. They typically invest 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions. It could be a good idea to consider factors such as your current stage in life, and future plans and goals before choosing the super investment option that’s right for you.

What’s the right investment option for me?

Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.

If you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.

If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.

While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.

Need some help working out the best option for you?

Why not book an appointment with one of our planners to go through your individualc circumstances, contact us on 02 9328 0876.

Article by – AMP Life Limited. First published December 2019.

Everything you need to know about salary sacrificing

Written by Sydney Financial Planning on 28 November 2019. Posted in Financial Advice. No Comments on Everything you need to know about salary sacrificing

“What is salary sacrificing?”

“Salary sacrificing (also known as salary packaging) is an arrangement between you and your employer, where you can use your pre-tax income to purchase some items or services. Your taxable income is therefore reduced and as a result, so is your tax bill. For many, it’s a win/win situation.¹

There are a lot of rules.

But there are two key points to remember.

Salary sacrificing depends on your employer and you both must agree on the arrangement.
Arrangements must be made in advance – you cannot sacrifice money that you’ve already been paid.

What to salary sacrifice for?

The most common way to use a salary sacrifice arrangement is to boost your superannuation, buy electronics such as laptops and devices, purchase cars and even buy a new home.

Superannuation – the contributed portion of your income will be taxed at a much lower rate (15% as opposed to 32.5% for an average weekly Australian wage of $1,238.30).²

Buying a house – salary sacrificing through super is especially beneficial for first-home buyers who are now able to withdraw up to $30,000 plus earnings to purchase their first home. If you don’t use this towards your first home, any salary sacrificed contributions will have to stay in your super until you retire, or you can pay a special tax to access it sooner.3″

“Purchasing a new car – the most popular way is a novated lease. Your employer takes the repayments and running costs out of your pre-tax income and you get to enjoy the car. Just make sure you’re buying a car within your means.³

Purchasing devices – there are some rules to keep in mind, including the device must be portable and used primarily for work.⁴

Is it worth it?

Salary sacrificing is a useful tool that can help you achieve your financial goals, as long as you’re smart about it. Don’t purchase something you don’t necessarily need just because of the possible tax breaks. Making these decisions alone can be confusing, which is why it’s always a smart move to discuss your options with the experts: us.

If you would like more information on salary sacrificing, feel free to get in touch with us anytime.”

Interested in finding out your options?

Speaking with one of our financial advisors would be a good place to start. Make a booking or call us on 02 9328 0876 to arrange a meeting.

1: Australian Government Australian Securities & Investments Commission (2019). Available at: www.moneysmart.gov.au/managing-your-money/income-tax/salary-packaging [Accessed 28 Oct. 2019].
2. Australian Government, Australian Taxation Office (2019). Salary sacrificing super. Available at: www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Salary-sacrificing-super [Accessed 28 Oct. 2019].
3. Wright, P. (2019). A beginner’s guide to salary sacrificing your house, superannuation and car – ABC Life 3 Mar. Available at: www.abc.net.au/life/what-salary-packaging-is-and-how-it-works/10830070 [Accessed 28 Oct. 2019].
4: Chapman, M. (2016). Five things you didn’t know you could salary sacrifice. Available at: https://www.moneymag.com.au/salary-sacrifice [Accessed 28 Oct. 2019].

When can I access my Super?

Written by on 23 July 2019. Posted in Superannuation. No Comments on When can I access my Super?

Here is a high-level summary as to when super may be accessible to you.

When you retire (and have reached your preservation age)

Typically, you can access your super when you’ve reached your preservation age and you retire. Find your preservation age in the table below.

Date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

When you’re transitioning into retirement

If you’ve reached your preservation age, you might wish to access a portion of your super through a transition to retirement income stream while continuing to work full-time, part-time or casually. While this may give you some financial flexibility, there will be things to consider, including that you’ll only be able to access up to 10% of your super savings each financial year.

When you reach age 60 and stop working (but aren’t retiring)

If you’re aged 60 to 64 and stop working, even if you have no intention of retiring completely (for example, you may get another job elsewhere), you’re still considered retired for the purposes of accessing super. This means you can cash out the super you’ve accumulated up until that time even if you begin working again under a different employment arrangement.

When you reach age 65 (even if you haven’t left the workforce)

When you turn 65, you don’t have to retire or satisfy any special conditions to get full access to your super. You’re also not obligated to withdraw it, however depending on your circumstances, there may be some benefits in doing so.

Other instances where you may be able to access super

While you generally cannot take your super until retirement, there are some specific circumstances where the law allows you to draw on your super early. These mainly relate to certain medical conditions or severe financial hardship, and you must meet eligibility criteria to apply.

Compassionate grounds

You may be allowed to withdraw a certain amount of money from your super on compassionate grounds where you don’t have capacity to meet certain expenses. This may include things like certain medical-related expenses, funeral costs and mortgage repayments that will prevent you from losing your home.

Severe financial hardship

If you’re under preservation age, have been receiving financial support payments from the government for 26 weeks continuously and can’t meet reasonable and immediate family living expenses, you may be able to withdraw between $1,000 and $10,000 from your super. This can only be done once in a 12-month period. If you’ve already reached your preservation age (plus 39 weeks), have received financial support payments from the government for a cumulative period of 39 weeks since reaching your preservation age, and are not gainfully employed on a full-time or part-time basis, there is no limit on the amount that you may be able to withdraw under severe financial hardship.

Incapacity

If you’re permanently or temporarily unable to work due to a physical or mental medical condition, you may be able to access super as a lump sum or via regular payments over a period of time.

Terminal medical condition

If you’ve been appropriately diagnosed with a terminal illness that’s likely to result in your death within a two-year period, you could apply to access your super and there are no set limits on the amount you can withdraw.

Super benefits less than $200

If you change employers and the balance of your super account is less than $200, or you have lost super that’s being held by a super fund or the Australian Taxation Office (ATO) that’s less than $200, you may be able to withdraw this money.

Leaving Australia

If you’ve worked and earned super while visiting Australia on an eligible temporary visa, you can apply to have this super paid to you as a Departing Australia Superannuation Payment (DASP), but there are requirements and documentation you may need to provide.

What to keep in mind

Depending on how much you have in super, it’s worth considering any implications of withdrawing this money, such as how the money may be taxed, and whether a withdrawal may affect Centrelink payments, such as the Age Pension.

Not sure if your meet some of the criteria?

Having an financial planning expert review your unique situation is always a good stratgey . Make a booking or call us on 02 9328 0876 to arrange a meeting.

Make the most of superannuation tax benefits

Make the most of superannuation – tax deductible personal contributions

Written by on 26 May 2019. Posted in Financial Strategies. No Comments on Make the most of superannuation – tax deductible personal contributions

However, due to the current contribution caps and rules, this also means that planning ahead over the longer term is the most effective way to maximise the potential benefits of super. Particularly worth noting, are the recent changes which allow for the ability to claim tax deductions on personal super contributions.

The concessional contribution cap of $25,000 applies to everyone, regardless of their age or superannuation balance. The ‘less than 10 per cent employment income’ rule no longer applies when looking to claim a tax deduction for personal superannuation contributions. Broadly, anyone who is eligible to contribute to super can claim a tax deduction for their personal contribution (other conditions apply, talk to your adviser). Keep in mind the 9.5% SG contribution from your employer is counted in this amount.

How this might benefit you in practice

Clients who already make salary sacrifice contributions may be asking, “what’s the big fuss around personal tax-deductible contributions”? In the end it creates the same tax effective outcome whether you choose to do this regularly via employer salary sacrifice or “ad hoc” via personal lump sum contributions. While this is true, there can be some advantages for people in the following circumstances:

Flexibility to calculate capacity and “top up” towards end of financial year: It has been challenging for employees with “lumpy” incomes to salary sacrifice in the past – it’s hard to determine how much your employer will contribute for the year (as it’s hard to project the amount of income for the year). The new super arrangements simplify this situation – you now have the flexibility to top-up concessional super contributions (up to the $25,000 cap) towards the end of the financial year. This offers more certainty around income and super contributions for the year to date.
Won’t reduce your SGC: The salary sacrifice contribution is classified as an employer contribution, and some employers simply include your salary sacrifice contributions to reduce or eliminate their SG obligation (proposed legislation is currently being drafted to eliminate this practice).
Employer doesn’t offer salary sacrifice: Some employees are not offered salary sacrifice arrangements all together. You can now effectively “salary sacrifice” by making voluntary personal contributions and then claiming these personal super contributions as a tax deduction in your tax return.
You now control the timing: The control, including the timing of when salary sacrifice contributions are made, is effectively in the hands of the employer. Unlike compulsory SG contributions (which must be remitted to the employee’s super fund no later than 28 days after the end of the relevant quarter), no such time frame exists for salary sacrifice contributions. This makes the employee reliant on the employer to do this in a timely fashion. In contrast, making regular personal contributions or one-off contributions towards the end of the financial year (you can choose whether or not to claim a tax deduction at that time), may allow people to take greater control of their super contribution strategy.
Easier to sacrifice bonuses: The need for an effective agreement to be in place with your employer prior to the salary/income being earned which reduces flexibility and can make it difficult to sacrifice bonuses or extra income.
Save interest in the meantime: Tax deductible contributions could also be combined with other strategies like keeping these “provisioned” contributions aside in your offset account in the meantime, which can reduce the cost of your loan.
Accrue any unused amounts from 2018/19: Beginning in 2018–19, a person can start to accrue unused amounts of concessional contributions cap and carry-forward these unused amounts. Provided your total superannuation balance prior 30 June is under $500,000, the first year a person can make additional concessional contributions from their accrued unused amounts is in the 2019–20 financial year.

Important reminder around admin and claiming a tax deduction.

The ‘paperwork’ requirements to qualify for a deduction for a personal superannuation contribution have not changed. The member must complete a valid Notice of Intention (NOI) to claim a tax deduction and lodge this with their super fund.

To be eligible to claim a tax deduction for a personal contribution, clients must notify the super fund of their intention to claim a tax deduction using the NOI and receive an acknowledgement from the fund by whichever of the following dates occurs first:

before they lodge their income tax return for the income year in which the contribution was made
by the end of the income year following the income year in which the contribution was made

Personal super contributions that the ATO allows as a tax deduction in the individual’s tax return will count towards their concessional contribution cap.
If employer super contributions are also received, clients will need to make sure these are taken into account when determining how much to claim as a personal tax deduction.

Also requiring consideration is the individual’s tax-free threshold: effectively $21,594 in 2018–19. Clients who bring their taxable income below these thresholds by making salary sacrifice and/or personal deductible contributions will find that they are paying contributions tax (15%) in the super fund when they could be paying zero tax personally. The amount of personal contributions that can be claimed as a tax deduction is also limited to the member’s taxable income, i.e. taxable income cannot be reduced below zero.

We encourage you not to leave things to the last minute. Super contributions are generally allocated and count towards a client’s contribution cap in the year in which they are received by the fund. Clients need to accordingly allow several business days for contributions made by BPAY® or similar methods to reach the fund.

Business owners should also consult their accountant or business advisor to consider other taxation and reporting matters, such as finalising trust distributions, claiming asset write-offs and the amount of personal super contribution to claim a tax deduction for.

Need some help to get started?

For more help and strategies on taking care of your super contributions, speak to your planner at SFP. Or if you don’t have a planner yet let us arrange an appointment, contact us on 02 9328 0876.

Article by Sydney Financial Planning