retirement planning and superannuation rowan fielke - director thornton group

Retirement Planning and Superannuation

Rowan Fielke - DirectorThornton Group

This information has been prepared by Thornton Group (Australia) Pty Limited (ABN 88 101 789 226) 60 Greenhill Road, Wayville, South Australia 5034.

This information was produced as an information service and without assuming a duty of care. This information contains general information only. It does not constitute financial advice and should not be relied upon as a substitute for financial or professional advice.

This presentation does not take into account any persons particular objectives, needs or full financial situation. Before making a decision relating to this presentation a persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make this assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information provided. Persons doing so, do so at their own risk.

Be sure that your adviser is Authorized Representative of a current Australian Financial Services License. Further to this make sure that your adviser is authorized to provide advice in the financial product groups or services that are contained and referenced to in this report.

The information in this presentation is based on our interpretation of relevant laws as at 22 October 2009 and is subject to change.

Disclaimer

Agenda1. Structuring & Tax Education2. Self Managed Superannuation Funds3. Key Benefits of Super4. Contributions and Tax5. Investment Choices6. Estate Planning7. Pension Planning8. Case Study9. Centrelink10. Who is Thornton Group?11. Questions?

Structuring & Tax Education Personal Tax Scales 2009/2010

* plus Medicare Levy

Any net capital gain is discounted by 50% if held greater than 12 months (pre 1985 CGT)

Taxable Income Tax Rate

$0 - $6,000 0%

$6,001 - $35,000 15%

$35,001 - $80,000 30%

$80,001-$180,000 38%

> $180,001 45%

Structuring & Tax Education Company & Trust Tax Rates for 2009/2010

* If no beneficiary, the trustee is taxed @ 46.5% ; ^ marginal tax rate of the beneficiary

Structuring & Tax Education

Entity Tax Rate *

Company 30%

Trusts

- distributed to company 30%

- distributed to beneficiary(ies) * MTR ^

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Structuring & Tax EducationSuperannuation Tax Rates for 2009/2010

* If the asset was held for 12 months or less, the full nominal gain is taxable^ 33⅓ discount method on complying superannuation funds

Super (Accumulation) Entity Tax Rate

Assessable Super Contributions 15%

Earnings 15%

Discount* Capital Gains (if applicable) 10%

Super (Pension) Entity Tax Rate

Earnings 0%

Capital Gains (if applicable) ^ 0%


SMSF Growth SMSF Population Table

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09

Total number of SMSFs 278,244 295,703 314,971 355,693 383,633 410,318

SMSF Population Table - Quarterly Data 2009

Sep-08 Dec-08 Mar-09 Jun-09

Net SMSF Establishments 8,315 6,598 5,957 5,815

SMSF Assets

Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09

Total Australian and Overseas Assets ($m) 131,526 165,425 209,930 326,413 330,100 332,286

Superannuation Industry Assets - Quarterly Data 2009

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

Total SMSF Australian and Overseas Assets ($m) 330,100 320,800 302,500 307,800 332,200

Total Super Industry ($m) 1,142,200 1,118,800 1,027,400 1,011,800 1,076,700

SMSF's as a Percentage of Total Super Industry 29% 29% 29% 30% 31%

Key Benefits of Super

Taxation Efficiency

Investment Choice

Estate Planning

Pension Planning

Structuring & Tax Education Contributions and Tax

Tax Rates

Contribution Limits

Salary Sacrifice

Government Co Contribution

Small Business Concessions

Franking Credits

Contribution LimitsContribution Limits for 2009/2010

* less than age 50; **greater than age 50 but less than age 75; ^ between ages 65 -75; ^^ less than age 65 - 3 year limit)

Concessional (CC)SG Contribution / Salary

Sacrifice

Non Concessional (NCC)

Capital Gains tax (CGT) Cap

$25,000* $150,000 ^

$1,100,000 Lifetime Limit

up to $500,000 Capital Gains - Small Business Retirement Exemption

disposal of business asset exempt from CGT – 15 yr

exemption

$50,000** $450,000 ^ ^


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Salary Sacrifice & Government Co Contributions Salary Sacrifice

Government Co-Contribution

A = assessable income including salary sacrifice contributions in income thresholds.

Contribution Tax

Concessional Contribution 15%

Assessable Income Contribution Co-Contribution

< $31,920 Any Amount $1,000 Max

$31,921 - $61,920 Any Amount Calculated $1.00 for every $1.00

> $61,921 Any Amount Nil


Investment Choices Dispelling the Myths of Super

Superannuation is a structure not an investment

You can control how your monies are invested

Superannuation funds do not have to include volatile assets within your portfolio

SMSF

Cash / Term Deposits / Debentures Managed Funds

Direct Shares Direct / Listed Property

Commercial Property, Plant & Equipment

Farming Land Gold, Art, Wine

Investment Choices

Instalment Warrants

Introduced in September 2007, an instalment warrant is a structure

that allows you to borrow to acquire assets within a SMSF

How does it work?

Create an instalment warrant trust and investment strategy

Lender of your choice (bank or any entity) finances the asset

purchase through a limited recourse loan

The instalment warrant trust owns the asset

The SMSF is 100% beneficial owner of the instalment warrant

trust

Instalment Warrants

Who Benefits Most?

Wealth accumulators seeking to expand and further diversify the

portfolio of investments in their SMSF Business owners that wish to rent their own

property Investors seeking to take advantage of the

concessionally taxed environment of a SMSF relative to other

investment structures such as individuals or companies

Investors looking to build a property portfolio

Structuring & Tax Education Estate Planning

Binding Death Benefit Nomination

Reversionary Pension

Wills

Power of Attorney

Testamentary Trusts

Divorce

Pension PlanningIncome Streams

Account Based Pension (ABP)

over age 60, pension payments from taxed superannuation funds will be tax free.

lump sum withdrawals will also be tax free.

Transition to Retirement Pension (TRIS)

aged between 55 and 60, pension payments (less any tax

free amount will be taxable and receive a 15% tax offset.

from age 60 income, drawings 100% tax-free lump sum withdrawals will generally be subject to tax,

depending on your age, the total amount withdrawn

and your superannuation components.


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Case Study Current Scenario

Details Facts & Figures

Age 60

Retirement Age 70

Annual Income $50,000

Super Balance $500,000

Annual Net Income $41,450

Expected Return 6%

Structuring & Tax Education Case Study

Accumulation Phase

Balance = $500K

Tax Rate = 15%

Pension Phase

Balance = $500K

Tax Rate = Nil

Salary Sacrifice

$31,700

Withdraw Annual Pension Income

$23,150

Plus Income = $18,300

* Including Medicare Levy – using 2009/10 tax rates ; ^ 100% tax free pension income ; Mature Age Tax Offset (MATO)=$500 ; Low Income Offset=$1,350. These rebates cannot be refunded in the way of income. However any unused credits received from

franking will be refunded by way of income.

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Case Study

Salary Sacrifice & Pension Strategy Facts & Figures

Contributions Tax $4,755

Salary $18,300

Pension Income $23,150

Assessable Income $18,300

Income Tax * $1,845

Rebates ($1,850)

Total Tax Payable $0

Net Income $41,450

Do Nothing Facts & Figures

Income $50,000

Income Tax* $8,550

Net Income $41,450

Total Tax Savings* = $3,795

*Income tax less contributions tax


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Case Study Do Nothing Facts & Figures

Balance in Super Accumulation

$500,000

Earnings @ 6.0% $30,000

Tax on Earnings @ 15% $4,500

Total Earnings $25,500

Engage in TRIS Facts & Figures

Balance now in Pension Phase $500,000

Earnings @ 6.0% $30,000

Tax on Earnings @ Nil $0

Total Earnings $30,000

Super Fund Tax Savings

= $4,500

Note that the projections do not take into consideration

franking credits


Case Study

Year Age Before Strategy

After Strategy Super

After Strategy TRIS

Total Strategy Benefit

1 60 $530,000 $26,945 $506,104 $533,049 $3,049

5 65 $669,113 $147,544 $534,409 $681,953 $12,840

10 70 $844,739 $346,855 $558,105 $904,960 $60,221

Super Accumulation & Pension Projection

Assumptions : SG Contributions payable on salary sacrifice contributions, 6% return, Nil indexation, drawing from pension approximately 4.6% of account balance; considers eligible rebates being low income and mature age offset for 2009/20010.

These projections are meant as a guide only and may not necessarily reflect the actual payments received. It has been published as an information service without assuming a duty of care. Subsequent changes may affect the accuracy of the calculation.

Strategy Benefit

$60,221

Centrelink

Commonwealth Seniors Health Card

What it is Benefits Eligibility

Age Pension

What it is Eligibility Rates Income And Assets Test

Other Benefits

Commonwealth Seniors Health Card (CSHC)

What is it?

It’s a card offered by the Federal Government to help with the cost of prescription medicines and other services if you are of Age Pension age but do not qualify for the Age Pension


What services the card helps you with: Discount on prescription medicines

Bulk-billed GP appointments, at the discretion of the GP

A reduction in the cost of out-of-hospital medical expenses

above a concessional threshold, through Medicare Safety Net

In some instances, additional health, household, transport,

education and recreation concessions which may be offered by

State or Territory and local governments and private providers

You may also be entitled to receive the Seniors Supplement – a

non-taxable payment made every 3 months to help with regular

bills such as energy, rates and motor vehicle registration fees.


Eligibility:

Be an Australian resident, living in Australia, and not subject to a

newly arrived residents waiting period Reached age pension age but do not qualify for Age

Pension (or do not receive certain other Social Security/Veteran

Affairs pensions/benefits) Provide Centrelink with your and your partner's tax file

number or be granted an exemption from providing your and your

partner's tax file number, and Have an annual adjusted taxable income* (ATI) of less

than: $50,000 (singles) $80,000 (couples combined), or $100,000 (couples combined who are separated due to

ill health)

* ATI = Taxable Income, Foreign Income, Total net investment losses, Employer provided benefits & Reportable superannuation contributions

Age Pension

What is it?

If you have reached retirement age, the Age Pension ensures you have a certain level of income in your retirement.

Age PensionEligibility:

You must first satisfy the age and residence requirements

- Age for males is 65 and for females this is increasing to age 65

Satisfy an Income and Asset Test (covered shortly)

If you are legally blind, you may be eligible for Age Pension (Blind),

which usually has no income or asset test

Age PensionCurrent Payment:

* Information as at 20 September 2009

$671.90 pf

$1,013 pf

$17,469.40 pa

$26,338 pa

Fortnight

Annual

Single

Couple(combined)

Age Pension

Income Test:


Full Payment

No Payment

Single

Couple(combined)

Up to $142 pf ($3,692 pa)

Up to $248 pf ($6,448 pa)

Over $1,485.80 pf($38,631.80

pa)

Over $2,274 pf

($59,124 pa)

Age PensionAsset Test (Home Owner):


Full Payment Part Payment

Single

Couple(combined)

$178,000

$252,500

Less than $594,750

Less than $925,500

Age PensionIncome Test:

What is included (some): Personal Earnings Net income from business,

including farming Deemed income Net income from property Family Trust Distributions Income from Income Streams Foreign income/pensions

What is NOT included (some): Deductible amount from an

Income Stream Rent subsidy paid from the

Commonwealth or State. Carer Allowance Emergency Relief Compensation or loss of, or damage

to,

building, plant & personal effects

Age PensionAssets Test:

What is included: Home Contents Motor Vehicles/Boats Holiday Home Bank Accounts Investments Share of Business/partnership

What is NOT included: Family Home * Funeral Bonds (up to $10,750) Gifts up to $10K pa & within

$30K over a rolling 5 year

period

* On land of 5 acres or less

Age Pension – Important NoteIncome and Asset Test Assessment:

Centrelink apply both the Income and Asset Test, and whichever test pays you the least, is the test which is applied in your circumstances.

Ie. If you qualify for the full rate of pension under the Income Test, however, your assessable assets are over the cut-off threshold, then no benefit is payable.

Other Centrelink Payments

Disability Support Pension

Carer Payment

Carer Allowance

Newstart Allowance/ Sickness Allowance


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Who is Thornton Group ? Country Culture

Superannuation and Retirement Specialist

Professional and Expert Investment Advice

In house Research Capabilities

Provides Continued Support and Advice

Fee for Service Philosophy

Dynamic Team Service

Are You Doing Things the Hard Way?

retirement planning and superannuation rowan fielke - director thornton group

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