Get a tax effective pension
while you are still working!
Contributed by Brett Davies Lawyers - Please contact Norbert
Cornell at firstname.lastname@example.org or on 61 2 99568008
or 61 437 381288
If you are 55 and over, you now have the option of easing
into retirement. You can reduce your working hours without
reducing your income. You can top up your reduced income
with a regular ‘income stream’ from your superannuation
savings. This is called the transition to retirement measure.
Until recently, you could only access your superannuation
once you turned 65 or retired. This meant it was difficult
to reduce your hours of work and still maintain your standard
of living. With this new measure, you can roll some or all
of your superannuation over into a retirement income stream.
Then you can top up your reduced income by drawing on your
Access to superannuation benefits may only be allowed as:
- A non-commutable complying income stream (complying lifetime,
life expectancy, or market linked income stream), or
- A non-commutable allocated income stream (with restrictions
on the ability to commute a lump sum).
How does it work?
A transition to retirement income stream is commonly used
with a salary sacrifice arrangement. People are able
to sacrifice their salary into superannuation and supplement
by withdrawing money from their superannuation fund as
an income stream.
Since 1 July 2007, withdrawals from a complying superannuation
fund for people aged 60 and over are now tax free. This increases
the tax effectiveness of the strategy for people who continue
to work after age 60. Contributions to the fund are taxed
at the concessional rate of 15% rather than a person’s
marginal tax rate and pension income drawn from the fund
will be tax free.
For people aged 55 to 59, the transition to retirement strategy
is still tax effective as the taxable pension income drawn
from superannuation attracts the 15% pension tax offset.
The concessional contribution cap will impact people using
a transition to retirement income stream/salary sacrifice
strategy. There is also the disincentive of salary sacrificing
amounts above the cap, as excessive contributions are taxed
at 46.5% (instead of 15%) and count towards the non-concessional
Under the new pension standards, a transition to retirement
income stream will have a minimum and maximum pension payment.
Since 1 July 2007, the income stream needs to pay a minimum
pension payment of 4% of the total purchase price of the
pension and a maximum of 10% per year. If an individual is
looking to commence this strategy and to maintain their net
income position, this could potentially limit the amount
of income that an individual can withdraw. The amount an
individual can draw will be limited by the thresholds and
the amount of capital they have, as the payments are based
as a percentage of the total fund balance.
Can I access my superannuation benefits in a lump sum?
No, this transition to retirement measure only allows you
to access your superannuation benefits as a ‘non-commutable’ income
stream, not a lump sum. This means that you generally still
cannot take your superannuation as a lump sum cash payment
while you are still working. You will need to take your superannuation
benefits as regular payments.
You need to be aware what impact this measure can have on
you and your personal circumstances. Some parts of this measure
are complex, and equally complex to set up and maintain.
You should see a financial adviser, accountant or your tax
agent to help you decide if this measure is right for you.
Each year the Australian Taxation Office (ATO) announces
its target areas in the Annual Compliance Program. Essentially,
it is a bit like Dad telling you what the consequences will
be if you are naughty - you know up front what is going to
This year, the ATO is focusing on the activities of your
high net worth clients.
How is the ATO going to do this? Well, the ATO has lots of
friends (local titles office, listed company annual reports,
police and authorities in other countries). It is also becoming
clever with its data matching. It will find your interest
and dividends, capital gains on disposal of property, mistress
in Lombok and income from employee share schemes (especially
by public company executives).
Posted in Accountancy, Commercial /Taxation Lawyers, Superannuation,
Taxation, Wealth Creation | No Comments »
Where does my Super go when I die?
Contributed by Brett Davies Lawyers
Please contact Norbert Cornell at accountants.com.au, 61
2 99568008 or 61 0437381288
QUESTION: I recently asked my adviser what happens to my
superannuation when I die.
My adviser immediately turned to my Self Managed Superannuation
Trust Deed and told me that the trustee of my superannuation
fund will decide who will receive my superannuation.
This didn’t sit well with me. Although I trust my
trustee, I want to decide who will get my superannuation.
My adviser told me I should update my trust deed to allow
for a binding nomination.
What is a binding nomination and what should I know about
ANSWER: A binding nomination forces the trustee of your
superannuation fund to give your superannuation to the people
who you want to receive it when you die.
Binding nominations have only existed for several years
so don’t be surprised if your trust deed doesn’t
allow for them. Even now, many new trust deeds (particularly
badly drafted trust deeds) don’t allow for them. Also,
you might think you have completed a binding nomination but
it may be a non-binding nomination (that is, you have made
a suggestion to your trustee who you would like you superannuation
to go to, but your trustee is not forced to follow your wishes).
A binding nomination must be current when you die. For your
binding nomination to be current, you must ensure not only
that you have made a nomination but you have also renewed
the nomination every 3 years. This can be difficult if you
do not have a power of attorney granting your attorney to
renew your binding nomination when you have lost mental capacity.
If your binding nomination has expired, (this is probably
90% of the population) your trustee will be required to hand
over your superannuation to one of 2 groups:
Your estate; or
Your “estate” is of course your Last Will and
Testament if you have made one. Your “dependants” is
a strange legal term but includes your family, some relatives
If you had a retail or industry super funds the trustees
of those funds (mostly in Melbourne) act as god when it comes
to your superannuation when you die. Although I have to tell
you that the trustees generally don’t like deciding
what to do with your superannuation. They would much rather
someone else tell them where your superannuation should go.
As you have a self managed superannuation fund then your
next of kin, or other trustee such as your 2nd wife or children
from your first marriage decide who will get your superannuation
if you don’t have a current binding nomination.
Of course, as have a self managed superannuation fund then
you can do update your trust deed to allow for non lapsing
Posted in Accountancy, Superannuation, Taxation, Wealth
Creation | No Comments »
No current posts on this category
14 July, 2007 – 1:29 pm
Posted in Insolvency | No Comments »
Is Your Will Up-To-Date?
30 March, 2007 – 1:15 pm
Please contact Norbert Cornell at email@example.com
, 61 2 99568008 or 61 0437 381288
Once upon a time, there was a very, very old billionaire
named J. Howard Marshall. One day he met a beautiful model
named Anna Nicole. J. Howard Marshall fell in love with Anna
Nicole because of her wonderful personality. Anna fell in
love with J Howard Marshall because of his chiselled good
looks. Because they loved each other so much, they got married.
Sadly, J. Howard Marshall died unexpectedly. The terrible
tragedy in their family continued with Anna Nicole also dying,
leaving an inheritance worth hundreds of millions of dollars.
Sorry, but we don’t think this story will have a happy
ending. Why? Because Anna Nicole didn’t pay enough
attention to her will
Anna Nicole’s Will is apparently out-dated. Everyone
wants custody of her infant daughter. Her advisers are being
threatened for not addressing her Estate Planning. The people
most likely to end up with Anna’s estate are the lawyers.
Nicole’s Will surfaced last week. Her Will resolves
nothing. It states that her entire estate goes to her son
Daniel. Sadly, Daniel died in September of 2006. Who gets
the dough now?
The Will is poorly drafted and is deficient in many areas.
There is nothing regarding her new-born baby Danneilynn.
Anna’s friend “Stern” is not mentioned
at all even though Anna joined in a “commitment ceremony” with
Stern late last year.
Adding to the confusion, Smith’s will contradicts
itself. In one section, it includes a curious provision which
appears to specifically disinherit future spouses and children,
which would include Danneilynn. It reads:
“I have intentionally omitted to provide for my spouse
and other heirs, including future spouses and children and
other descendants now living and those hereafter born or
However, in other sections, it specifically instructs the
executor of Smith’s will to manage the estate to provide
for her “children.” This language appears to
provide a portion of the estate for the care of Dannielynn.
If there is still any chance that a husband and wife (or
de factos) might have children a Will should include “unborn
children” as beneficiaries. That’s how I would
have done it.
The next issue is Guardianship. Money does not follow the
Guardian. Money follows the Executor. The Executor generally
keeps the money in trust for the minor. That money is protected
by the financial planners and accountants. Often you may
want the Guardian and Executors separate.
Regardless of the size of Anna’s fortune, the confusion
surrounding her estate could have been avoided by following
a few simple estate planning guidelines.