Strategies To Maximise Retirement Income

Four Strategies To Maximize Your Retirement Income

Joel Johnson, CONTRIBUTOR. From – Opinions expressed by Forbes Contributors are their own.

The main concern that people have in or near retirement is running out of money. There are many strategies people can employ to ensure a successful retirement. Here are four of the strategies you can take to maximize your retirement income.

Strategy #1- Lower your taxes.

Instead of looking at your investments first, begin by taking a look at your taxes and figure out the best way to minimize them. This is not “cheating”, but rather, making sure you are not paying more than you need to at tax time. For example, many people own mutual funds that unbeknownst to them, spin off distributions which cause them to pay taxes. By simply changing your portfolio’s funds to more tax efficient funds, these distributions won’t hit your taxes and negatively impact your bottom line, leaving  more money in your retirement fund.

Strategy #2 – Invest with a bias towards Income-Producing Securities and Products

When we think retirement income it is important to think along the lines of pension funds. Pension funds are ideal for investing to produce income and preserve principal. When planning for a successful retirement, you ideally want to move from growth-type investments (a good choice for people in their 30's and 40's) to income producing investments (such as preferred stocks, bonds). Income producing assets produce a steady stream of income, and while there is some opportunity for growth, you have peace of mind with your income, should the stock market take a dip.

Strategy #3- Protect against inflation

This is by far the biggest risk that many people face in retirement! Consider this: If you retire today at age 65, there is a high probability you will live to age 90.  This means you may need to triple your monthly income, just to keep up with inflation. Many people do not plan for inflation or an increased life span, thinking that the money they have saved will be more than adequate. Consider planning for retirement as giving yourself a ‘yearly raise.’

Strategy # 4 – Get a Retirement Income Plan

The first thing to do when contemplating retirement is to develop a retirement income plan.  This is where you need to envision how you see your retirement and what your savings will need to be in order to satisfy the lifestyle you desire. Many retirees spend the first ten years of their retirement traveling and taking advantage of their hobbies. Some retirees will also want to have the ability to help pay for their grandchildren’s education or help their own child purchase a home. These things all cost money and the pre-retiree will need to factor that into their retirement plan.

Figuring out how much money you will need to retire comfortably and whether you are on track (i.e. are you saving enough?) are two critical questions to ask in the planning process. You might want to consider joining forces with a trusted financial advisor who can deliver a complete picture of your assets and assist you with your retirement plan.

With these four strategies in place, you can maximize your retirement income and ensure that your retirement is designed the way you want it to be!

By |December 5th, 2017|Self Managed Super Fund News|Comments Off on Strategies To Maximise Retirement Income

Super reforms

Super reforms get SMSF Association tick of approval – from Self Managed Super Fund Association 17 September 2017

The SMSF Association has thrown its weight behind the superannuation reforms introduced into the Parliament last week, believing they will improve accountability and member outcomes.

The Minister for Revenue and Financial Services, Kelly O’Dwyer, introduced a raft of changes that include establishing the Australian Financial Complaints Authority (AFCA), closing a salary sacrificing loophole, implementing the Superannuation Accountability and Transparency package, and allowing employees to choose their own superannuation fund.

SMSF Association CEO John Maroney says these reforms are a welcome step to ensure the superannuation system delivers better retirement outcomes for all Australians.

“We commend the Government for introducing these reforms into the Parliament, all of which have long been advocated by the Association.

“In particular, giving employees their choice of fund is a long-held policy position of the Association on the basis it introduces an element of competition into the $2.3 trillion superannuation industry.

“All employees should have the right to enter the fund of their choice, including a self-managed super fund, when starting new employment, and should not be forced into a fund because of an enterprise agreement or industry award.

“We have also been highly supportive of the move to close the legal loophole whereby employers have been able to short-change their employees of their Superannuation Guarantee entitlements.”

Maroney says the ACFA, which will combine the activities of three complaint schemes, should prove far more effective in facilitating the resolving of financial disputes.

“From our perspective, we welcome the fact that the ACFA will incorporate the key features of the Superannuation Complaints Tribunal, the Financial Ombudsman Scheme and the Credit and Insurance Ombudsman, thus providing certainty to all stakeholders.”

He says it’s imperative that the superannuation system engage, as far as possible, with all fund members, and this legislative package should prove another step along the way to achieving this outcome.

By |October 24th, 2017|Self Managed Super Fund News|Comments Off on Super reforms

Super Changes Reshape Succession Planning

From 1 July 2017, the need for specialist advice is as important as ever, with the introduction of the transfer balance cap (TBC) impacting on the amount of death benefits that a beneficiary can receive as an income stream. Clients who have already put plans in place to direct their superannuation where they want it to go on their death will have to redesign those plans. Advisers talking to clients about putting such plans in place will need to refresh their thinking around the relevant considerations to be addressed in the advice they provide.

Where the recipient of a death benefit pension exceeds their own TBC, they will need to take any excess as a lump sum death benefit. Different rules apply to modify the TBC rules for a child beneficiary and for a reversionary beneficiary. The amount of money that can now be retained within the superannuation environment upon the death of a member as either a pension account or an accumulation account of the recipient member has been materially curtailed.

This is a significant shift in relation to superannuation death benefits and estate planning, making it paramount to review all succession plans involving superannuation benefits.

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• A 3-hour intensive face-to-face course where you will explore and discuss all aspects. For most of the course we will look at some strategies you can use to get the best outcomes for your clients, and tackle some tricky real-life situations which will get you thinking outside the box.

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By |October 16th, 2017|Uncategorized|Comments Off on Super Changes Reshape Succession Planning

ATO set to release further guidance outlining circumstances for SMSF to establish and maintain a reserve.

In light of the 1 July changes, regarding the new transfer balance cap of $1.6 million the ATO has updated its frequently asked questions page for SMSF trustees including information about the use of reserves by SMSFs.

The ATO said it is currently monitoring the use of reserves by SMSFs following the introduction of new limits and restrictions including the transfer balance cap and the total super balance.

“While the establishment of a reserve is not specifically prohibited, we would consider that there are very limited circumstances when it is appropriate for a reserve to be established and be maintained in an SMSF,” the ATO said.

“The use of reserves beyond these circumstances may suggest to us that they are being used as part of a broader strategy to circumvent the new limits and restrictions.”

The ATO also warned that any unexplained increases in the creation of new reserves or in the balances of existing reserves maintained by SMSFs is “likely to attract close scrutiny”.

The tax office has also announced that it will issue further guidance on when it may be appropriate for an SMSF to establish and maintain a reserve.

“In the meantime, if you are considering using reserves in your SMSF, we strongly encourage you to seek independent professional advice or approach us for advice before doing so,” the ATO cautioned.

It is thought that this update from the ATO is likely aimed at SMSF trustees attempting to use reserves to get around the $1.6 million cap so that they can contribute another $100,000 or so.

You have a reserve in an SMSF either because you're running a complying pension or because for the last five or six years you've adopted a strategy of trying to finance anti-detriment payments, and that strategy is now redundant.

By |September 26th, 2017|Self Managed Super Fund News|Comments Off on ATO set to release further guidance outlining circumstances for SMSF to establish and maintain a reserve.

CGT Relief Segregated & Proportionate Method

What is the CGT relief all about?
Superannuation funds that are paying pensions currently receive a very valuable tax break. They pay no income tax on rent, interest, dividends, capital gains etc. they earn on the assets they have invested to support pensions. What CGT relief do you get and what are the Segregated & Proportionate method? Read on:
If an asset is supporting a mixture of pension and non-pension (accumulation) benefits, some of this investment income is free of tax.

For some people this tax break will be wound back a lot from 1 July 2017.
1. If you are receiving a “transaction to retirement” pension this will stop being classified as a pension when it comes to working out how much of your fund’s investment income is free of tax; and
2. If you are receiving a “full” pension (ie. not a transition to retirement pension), you must make sure it’s not worth more than $1.6m at 1 July 2017. If your pension is bigger, you will need to reduce if beforehand. If you do that my taking money out of your pension but leave it in your super fund, that will mean some of your fund (the part that’s not in a pension any more) isn’t entitled to this special tax treatment. Overall, a similar portion of your fund will be devoted to paying pensions and so this reduced the amount of your fund’s investment that is free of tax.

This is a particularly big deal if you have assets that grown over time and you are expecting to sell them at profit (i.e realise a capital gain) in the future. The way the law works is that the amount of that profit or capital gain that is taxable depends on how much of the fund is in pension phase when the assets is sold, not what the fund looked like when the assets was bought or when it grew in value.

And this is the problem – if you have a transition to retirement pension or if you have a full pension but are winding it back a bit in preparation for 1 July 2017, less of your fund will be in pension phase in future. That means more your fund’s capital gains will be taxed at the time you sell an asset and realised a capital gain.

To ease the transition, the Government has specifically factored in some capital gains tax relief for people affected by the changes.

The idea is that the CGT relief will make sure that when an assets is sold after 1 July 2017:

1. Capital gains that built up after a changeover date in 2016/17 (open 30 June 2017)will be taxed based on how much of the fund is in pension phase at the time; while

2. Gains that built up beforehand will get special treatment to reflect the fact that they would have been partly or even entirely free of tax if the new rules hadn’t come in.

The CGT relief does this by allowing funds to change the amount of treated as an asset’s purchase price (or cost base) for capital gains tax purposes to whatever it was worth on the changeover date in 2016.17. This is called “resetting the cost base”. Unfortunately, it also re-sets the date on which the asset is treated as having been bought. This is important because your fund gets a special capital gains tax discount when it sells assets it has held for more than 12 months. So, if your changeover date is 30th June 2017, and you’re eligible for the CGT relief, you”ll be able to res-set your cost base to whatever your assets are worth on 30 June 2017 but you’ll have to hold them until 1 July 2018 before you get the discount.

Is my fund eligible for the CGT relief?
Firstly, to be eligible for the CGT relief you will need to be affected by the new super rules that are coming in from 1 July 2017. This means you must either:

1. Be receiving a transition to retirement pension; or

2. Have more than $1.6 m in “full” super pensions overall and need to wind some of them back in the fund in which you’re claiming the CGT relief.

You can’t claim CGT relief if, for example, you and your spouse are retired (so receiving full pensions) and you both have less than $1.6m in super pensions. (The Government’s argument is that you don’t need the CGT relief – your fund can keep all its pensions in place and so will continue to pay no tax n its investment income). If even just one of you has more than $1.6m in a full pension, you’re fine – your funds meets this first test.

Secondly, your fund needs to meet some specific conditions.

These specific conditions provide two methods (or pathways) for being eligible for the CGT relief – called the ‘segregated” method and the “proportionate” method. In theory, different assets in your fund could be eligible for the CGT relief under different methods. Mostly though, its the same method for the whole fund.

By |May 23rd, 2017|Self Managed Super Fund News|Comments Off on CGT Relief Segregated & Proportionate Method

Government Budget May 2014 Superannuation Commentary

Government delivers tough 2014-15 Federal Budget

Refunds of excess non-concessional contributions, changes to the Super Guarantee and tighter rules on qualifying social security benefits were the main Budget announcements to impact on superannuation this year.  These changes, along with others, should provide a Budget deficit of just under $30 billion in 2014-15 with no surplus due anytime soon.

The key changes proposed for superannuation and social security are:

  1. Excess Non-Concessional Contribution Refunding

For any excess contributions made after 1 July 2013 that are over the non-concessional contribution (NCC) cap, the Government will allow withdrawal of the excess NCCs and any associated earnings from super.  Earnings withdrawn from the fund will be taxed at personal tax rates.  If the excess NCCsare left in the fund, tax will be paid on the excess at the top marginal tax rate.

  1. Rephasing Superannuation Guarantee

The Superannuation Guarantee (SG) Rate will increase to 9.5% from 1 July 2014, instead of remaining at 9.25% as the Government has previously indicated would occur as part of its mining tax repeal.  The Superannuation Guarantee rate will then be maintained at 9.5% until 30 June 2018, and on 1 July 2018 it will resume increasing by 0.5% increments until it reaches 12% in 2022-23.

  1. Increasing of Age Pension Age to 70 from 2035

The Age Pension age is to be lifted to 70 from 2035.  From 1 July 2025, the Age Pension qualifying age will continue to rise by six months every two years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035.  People born before 1 July 1958 will not be affected by this change. Also, there has been no change to the preservation age for accessingpreserved superannuation benefits.

  1. Indexing the Age Pension by the Consumer Price Index

The Age Pension is to be indexed to the Consumer Price Index (CPI) from 1 September 2017.  Currently, pension payments are indexed in line with the higher of the increases in the CPI, Male Total Average Weekly Earnings or the Pensioner and Beneficiary Living Cost Index.  This change will likely result in lower future pension increases.

  1. Resetting the Pension Deeming Rate Thresholds

The income deeming thresholds used in the pension income test will be reset to $30,000 for singles (currently $46,600) and $50,000 for couples (currently $77,400) from 20 September 2017. The deeming rules assume financial assets are earning a certain amount of income, regardless of the income actually earnedfor the purpose of determining eligibility to social security payments.  The Government is making this change to better target pension payments, by tightening the income test.

  1. Maintaining Eligibility Thresholds for Australian Government Payments for Three Years

Eligibility test thresholds for pension and pension related payments will be maintained for three years from 1 July 2017. Major pension related payments include the Aged Pension, Carer Payment, Disability Support Pension and the Veterans’ Service Pension.

  1. Commonwealth Seniors Health Card Changes

There are proposed to be a number of changes to the CSHC.  These changes are:

  • Indexing the current income limits for the CSHC by the CPI in line with its election commitment to do so.
  • Including untaxed superannuation income in the eligibility assessment for the CSHC from 1 January 2015.  All superannuation account-based income streams held by CSHC holders before the 1 January 2015 will be grandfathered under the existing rules.
  • The Government will achieve savings of $1.1 billion over five years from 2013-14 by ceasing the Seniors Supplement for holders of the CSHC from 20 September 2014.

How can we help?

If you would like some assistance with identifying how these recent changes are likely to affect your own retirement income planning, please feel free to give me a call to arrange a time to meet so that we can discuss their impact on your particular circumstances. We can then determine whether you need to make any changes to your existing arrangements.

By |May 16th, 2014|Self Managed Super Fund News|0 Comments



From July 1st 2013 the ATO will be able to directly tax and fine trustees, and potentially complicit accountants and advisors, for breaches in their fund. Fines start from $850 and, depending on the type and number of breaches, can extend into the tens of thousands of $$$. Before you ask, the answer is no: these fines cannot be paid for or claimed as an expense of the fund.

The new regime extends the ATO's power to enforce SMSF regulations for small to medium sized breaches instead of sanctioning funds as entirely non-compliant, or battling it out in the court system. As well as fines and taxes, the ATO may also demand trustees act to rectify breaches, or enforce mandatory education schemes.

By |June 17th, 2013|Self Managed Super Fund News|0 Comments

Super Tax and the Family Home

When the family home and super can incur tax

With property and superannuation the two most widely held and potentially valuable assets among the baby boomers, it makes sense that a portion of either of these could be passed to future generations.

While there is no such thing as death duty in Australia, the tax man could end up doing quite well from inherited property and super assets. When it comes to inheriting property and other investment assets, the taxing point is when the assets is subsequently sold.

Where a person inherits a family home, they have two years to sell it tax free. After that, the potential for capital gains tax largely depends on when the home was bought.

A house bought after 1985 and sold after the two-year-tax free period would incur capital gain tax on the difference between what it is sold for and what the deceased paid. If bought pre-1985, the duty would be levied on the difference between what it was sold for and the market value at the time of death.

Where a house is to be sold, he says, it is important to note it has to be sold and settled within the two-period after death to avoid tax.

If you sell the property one month before the two-year grace period, and the property has a standard 60 day settlement, then you could be liable for capital gains tax on a portion of any gain.

With an inherited investment property that is subsequently sold, the amount of tax will also depend on whether the property was bought pre-1985 or post-1985 in the same way as the family home.

When CGT is payable, there may be a 50 per cent discount if the asset is held for more than 12 months.

Although the general rule is that the discount is only available where the CGT asset has been owned by the taxpayer for at least 12 months, in the situation where a beneficiary of a deceased estate acquires a post 12-CGT asset within 12 months of the disposal they may be eligible for the CGT discount.

This is because assets acquired by the beneficiary will, for the purposes of claiming the CGT discount, generally be treated as having been owned by the taxpayer for at least 12 months, as long as the collective period of ownership of the deceased and the beneficiary is at least 12 months.

But a pre-CGT asset of a deceased person is taken to be acquired by the beneficiary at the date of the death of the deceased.

With super, the calculations around what tax may need to be paid by the beneficiary is more complicated, depending whether they are a dependant or non-dependant under the relevant legislation. There may also be life insurance arrangements.

Inheriting super money can involve hidden duty traps. A super fund may include contributions  that are fully taxed (employer contributions and salary sacrifice) and untaxed (such as additional tax-free contributions).

An adult beneficiary who received super benefits can pay tax anywhere between 0 per cent and 30 per cent depending on how the deceased made the contributions.

It depends on how the superannuation went in as to how it is taxed when it comes out. The tax implications of receipt of fully taxed contributions can have quite an impact on the benefit received from the fund.

A common strategy for retirees between 60 and 65 is to withdraw what would otherwise be a taxable component on death (tax free after age 60) and recontribute it, subject to contribution limits, as a non-concessional contribution. That part of any death benefit would be received by the beneficiary tax free.

As an additional strategy, super fund member could establish a second account-based pension which could potentially be 100 per cent pension which could potentially be 100 per cent tax free. The original account-based pension may still have a taxable component.

The taxable and non-taxable amounts between two pension accounts, the retiree could draw as such as they needed to live off from the pension with taxable contributions and the minimum from the other pension.

When it comes to death, it might be that the taxable component of someone’ super has been reduced to zero and anything that is passed on is duty free.

Maintaining assets in an estate for a period of time after death can also carry Ttax advantages.

For example, a beneficiary may inherit $100,000. If the assets are maintained in the estate, they are then allowed a period of up to three tax returns where any income is only taxed at individual tax rates. After the three tax returns they may be taxed at the top rate depending on circumstances.



By |June 16th, 2013|Self Managed Super Fund News|0 Comments

Super changes – Future Tax Bills

SMSFs face higher future tax bills after super changes

By Property Observer Friday, 05 April 2013

Property laden self-managed super funds face the prospect of higher tax bills following super changes announced by Superannuation Minister Bill Shorten last week. Mr Shorten announced that super income streams over $100,000 will be taxed at a concessional rate of 15% from July 1, 2014. For people with more than $2 million in super assets (such as investment property) supporting income streams, the reform will affect assets earning a rate of return of 5%. The most recent ATO figures for 2011 show that 28% of SMSFs now have account balances of at least $1 million. "From July 1, 2014, future earnings (such as dividends and interest) on assets supporting income streams will be tax free up to $100,000 a year. Earnings above $100,000 will be taxed at the same concessional rate of 15% that applies to earnings in the accumulation phase," said Federal Treasurer Wayne Swan in a joint statement with Mr Shorten last Friday. Treasury announced that special arrangements will apply for capital gains on assets purchased before 1 July 2014: For assets that were purchased before 5 April 2013, the reform will only apply to capital gains that accrue after 1 July 2024; For assets that are purchased from 5 April 2013 to 30 June 2014, individuals will have the choice of applying the reform to the entire capital gain, or only that part that accrues after 1 July 2014; and; For assets that are purchased from 1 July 2014, the reform will apply to the entire capital gains. "These generous transitional arrangements will ensure that people who have already purchased superannuation assets will have ten years to decide whether they want to restructure their superannuation holdings, before their capital gains start to be affected," reads the statement. The reform will not affect the tax treatment of withdrawals. "Withdrawals will continue to remain tax-free for those aged 60 and over, and face the existing tax rates for those aged under 60." The government also announced that for people aged over 60, concessional caps will be increased from $25,000 to $35,000 from July 1. This concession will be extended to those aged 50 and over from July 1 next year. Prior to the announcement, the capital gains proposals were slammed by small business leaders. "As small business owners, our lives are based around our assets," Council of Small Business of Australia chief executive Peter Strong said. "It's almost an attack on small business." The supposed plan would see capital gains tax charged when properties move into the pension phase of an account, meaning SMSF owners would be charged more money as they near the point where they are able to draw funds. "When you have an asset like a property and it's an integral part of your business, it seems unfair to change the rules and then dictate when you can retire."

By |May 8th, 2013|Self Managed Super Fund News|Comments Off on Super changes – Future Tax Bills

Paying Benefits from a Self Managed Super Fund

As reported on the ATO Website 7/5/2013
Commissioner's foreword

At some stage your self-managed super fund will have one or more members enter the retirement phase. It also means you need to be aware of the additional responsibilities you have when you start paying retirement benefits to members of your own fund.

The strict rules governing self-managed super funds continue as you move out of the accumulation phase and move into paying benefits to your members.

You can pay retirement benefits in a number of ways. Whichever way you pay from your fund, you must ensure the relevant payment rules and regulations are being met. You are still responsible for the continued operation of the fund even if you use a tax, financial or superannuation adviser to help you manage it.

This publication is designed to help you meet your responsibilities in the retirement phase.

Chris Jordan

Commissioner of Taxation
Self-managed super and you

Like other super funds, SMSFs are a way of saving for your retirement. Generally, the main difference between an SMSF and other types of funds is that members of an SMSF are the trustees. This means the members of the SMSF run it for their own benefit.

SMSFs are not suitable for everyone and you should think carefully before deciding to set one up. It is a major financial decision and you need to have the time and skills to do it. There may be other, better options for your super savings. If you are considering an SMSF for your super savings, the publication Thinking about self-managed super (NAT 72579) provides you with some practical information. Licensed financial advisers, tax agents and accountants can also help you understand what is involved.

If you decide that an SMSF is the appropriate vehicle for your super savings, you need to ensure the fund is set up and maintained correctly so that it is eligible for tax concessions, can pay benefits and is as easy as possible to administer. Setting up a self-managed super fund (NAT 71923) provides some basic information on this and the steps you need to follow to set up the fund correctly.

Once your SMSF audit is established, you as trustee control the investment of the contributions and fund earnings. Your SMSF must have a trust deed that forms part of the governing rules for operating the fund. You must also prepare and implement an investment strategy and ensure it is reviewed regularly. There are rules and regulations you must follow to ensure the fund's assets are protected to provide benefits in retirement.

While contributions are being made to the fund it is considered to be in the accumulation phase. The publication Running a self-managed super fund (NAT 11032) explains the responsibilities and obligations of trustees operating an SMSF.

When one or more members retire, you as trustee need to understand and follow the requirements of the law and regulations governing the payment of benefits. This publication is designed to assist trustees who are required to make payments out of their SMSF. It is important to note the rules and regulations that apply to funds in the accumulation phase continue even when one or more members retire; however, additional rules apply to the retirement phase.

You should continually reassess the circumstances of the fund and each individual member to determine whether an SMSF is still the most appropriate option for your retirement savings. In some cases you may find that you no longer have the capacity to deal with the complexity or the time required to manage your SMSF.

You may decide that it is not cost-effective to continue to run your own fund. Depending on the circumstances it may be necessary to transfer member benefits to another complying super fund.

Other reasons why you might wind up your SMSF include when all members have left the SMSF (for example, they have rolled over their benefits to another fund or have died) or all the benefits have been paid out. Winding up a self-managed super fund (NAT 8107) details the process you need to follow to wind up your fund.

By |May 6th, 2013|Self Managed Super Fund News|Comments Off on Paying Benefits from a Self Managed Super Fund

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