I agree with what most others are saying, you get locked in to working if super is your "investment" plus, it doesnt make near as much as it could elsewhere.
How much to contribute to super?
- Thread starter Stella
- Start date
it doesnt have to be your only investment , you have to weigh up the circumstances , and in mine right now , it is the best way to go.
at 45 , its not as far down the track as others , but if i didnt sacrifice (15% tax) , the 40% income tax and 27% maintenance dont leave too much to do much else with
Mystery , you are correct about my CGT figure, which I hurriedly wrote. the $80000 is then taxed at ones particular tax rate.
if you plan to hold then I can see you have made a solid investment.
The leverage aspect is very important as you note.
At 55 cant you start to take out your super contributions with no tax imposition , provided it is under a certain dollar amount........perhaps it is $140,000. I was told this several moths back and didn't pay too much attention.......Is this correct
if you plan to hold then I can see you have made a solid investment.
The leverage aspect is very important as you note.
At 55 cant you start to take out your super contributions with no tax imposition , provided it is under a certain dollar amount........perhaps it is $140,000. I was told this several moths back and didn't pay too much attention.......Is this correct
I've no idea re: taking out supa contribution. I figure it will probably all change in the next 6 years before I reach 55 anyway. I just prefer property, ... it allows me to build wealth and I have access to funds to invest how I want, whereas supa is fine, but it is locked away and the rules seem to continually change. Its just a preference thing for me.
We will have a mixture of supa and property when we finally retire, but property has given us the greater gains in the shorter time thats all I know or care about.
Martin
I am 32 and have worked in a number of jobs some temp and some overseas (no super) which meant my super was all over the place and I have lost a lot of money over the years due to paying account keeping fees on small amounts. I have now finally consolidated all of this into my industry super fund. My current employer (semi government) requires me to put in 7% of my salary myself and in return my employer pays 17% on top of this. I will soon have the option to go to the standard employer pays 9% super deal.
My partner and I have plans to aggressively invest and I will need every dollar I can get in the hand now. I have had thoughts about the second option but think it's pretty hard to turn down that much super paid by your employer.
My partner and I have plans to aggressively invest and I will need every dollar I can get in the hand now. I have had thoughts about the second option but think it's pretty hard to turn down that much super paid by your employer.
About which option .
Please expand
Havn't gone into it in detail , but my understanding is that once you hit 55 you can withdraw upto 10 % of the value of your superfund each year at possibly a 15 % tax rate. ? withdraw from your super and pay 15 % and live on it , and put all your wage in to super ....
Once you get past ? 60 ? 65 you can only withdraw 4 % of the value of your super.
Not sure if there is a min dollar amount you need in super to do this .
Obviously if this is the case there is a major cash flow / tax advantages in having money in super as you get close to retirement.
Down side is lack of gearing.
I will be putting more money than I planned prior to the latest changes in super , but certainly not all that I could when you consider the maximum 4 % you can " earn " ( in terms of income withdrawn ) on the money you have in there.
Cliff Turner
Once you get past ? 60 ? 65 you can only withdraw 4 % of the value of your super.
Not sure if there is a min dollar amount you need in super to do this .
Obviously if this is the case there is a major cash flow / tax advantages in having money in super as you get close to retirement.
Down side is lack of gearing.
I will be putting more money than I planned prior to the latest changes in super , but certainly not all that I could when you consider the maximum 4 % you can " earn " ( in terms of income withdrawn ) on the money you have in there.
Cliff Turner
Down side is lack of gearing - That was yesteryear.
Self-managed super funds will get an investment
fillip with a Senate decision allowing them to
borrow. By Michael Laurence.
A bill is expected to be passed by the Senate this week that will trigger extensive borrowing by self--managed superannuation funds to snap up residential and commercial property.
"Expect an avalanche of new gearing products aimed at DIY funds to follow," says Sydney tax and superannuation lawyer Robert Richards.
The raft of tax and super measures due for debate by the Senate in the final session of parliament includes amendments that will legally allow self-managed funds to borrow to invest,provided stringent rules are met.
This marks a complete turnaround in superannuation law that has prohibited borrowing by selfmanaged funds since the 1980s. And the about-face is despite the Australian Taxation Office and the Australian Prudential Regulation Authority (APRA) issuing a joint ruling late last year
that investing in instalment warrants by self-managed funds to effectively gear assets was a breach of the legal ban on borrowing. The regulators' move created uproar among selfmanaged funds and their advisers.
The government immediately responded to the stand from the regulators against de facto borrowing using instalment warrants by announcing the legislation before the Senate. The ATO, as regulator of Australia's 360,000 self-managed funds, and APRA backed off from a crackdown given the imminent change in the law.
Trustee members have had good reason to feel confused. Numerous self-managed funds have long used instalment warrants to buy mainly equities and investment funds. And some product promoters had gained ATO product rulings that Richards understands were limited to the tax aspects rather than the prohibition on borrowings by super funds.
Richards says that although the borrowing provisions before the Senate are under the heading of "instalment warrants", the changes will simply open the way for funds to borrow with or without warrants, provided the new borrowing rules set out in the legislation are strictly
followed.
The bill will allow a self-managed fund to borrow to invest, provided the asset is held in trust for the fund until it acquires legal ownership after final payment, and the lender cannot make a claim against any of the fund's assets in the event of default - other than the one related to the
borrowing.
Richards says that borrowing arrangements under the bill will enable self-managed funds to receive an income from the asset being purchased while it is held in trust. Interest on the loan will be deductible, and capital gains tax will not be triggered when it is transferred from the trust to the fund.
Vincent Scully, chief executive of boutique financial services group Calliva, says the passing of the bill will clear away the uncertainty involving borrowing to invest by self-managed funds. "Any uncertainty [in the financial industry] is bad," Scully says. "Now the ground rules have changed."
Scully argues that borrowing to invest provides self-managed funds with a smart way to deal with the new super regime from July that limits annual contributions by members yet makes super much more effective with tax-free benefits for those over 60. "You can build up the appreciating assets in your super [by borrowing to invest], making your super money work
much harder." Richards is among the professional advisers who believe that the bill will provide tremendous confidence for self-managed funds to gear to borrow to buy the commercial and residential properties of their choice.
Many self-managed funds have been unable to directly own residential and commercial properties because the cost far exceeded the members' super savings and because of the bar against borrowing.A superannuation writer with publisher Thomson ATP, Stuart Jones, warns in the Australian
Financial Planning Handbook 2007-08 that under the bill a self-managed fund will only be allowed to borrow to buy assets that are permitted under super law. A fund is barred, for example, from acquiring residential property from a member but can acquire business property from members.
Melbourne superannuation lawyer Dan Butler, principal of DBA Butler, urges self-managed funds to take extreme care about borrowing to buy properties. Members' retirement savings could be jeopardised if the property fell significantly in value. Butler says that products with packaged finance generally charge higher-than-market interest rates because of their inability to make a claim against assets of the fund, other than the asset
involved in the transaction, in the event of a default. He predicts more self-managed negotiate their own financing arrangements.
The Act received Royal Ascent early in October and we have already started the ball rolling on the processing of 2 loan applications for SMSF's
Self-managed super funds will get an investment
fillip with a Senate decision allowing them to
borrow. By Michael Laurence.
A bill is expected to be passed by the Senate this week that will trigger extensive borrowing by self--managed superannuation funds to snap up residential and commercial property.
"Expect an avalanche of new gearing products aimed at DIY funds to follow," says Sydney tax and superannuation lawyer Robert Richards.
The raft of tax and super measures due for debate by the Senate in the final session of parliament includes amendments that will legally allow self-managed funds to borrow to invest,provided stringent rules are met.
This marks a complete turnaround in superannuation law that has prohibited borrowing by selfmanaged funds since the 1980s. And the about-face is despite the Australian Taxation Office and the Australian Prudential Regulation Authority (APRA) issuing a joint ruling late last year
that investing in instalment warrants by self-managed funds to effectively gear assets was a breach of the legal ban on borrowing. The regulators' move created uproar among selfmanaged funds and their advisers.
The government immediately responded to the stand from the regulators against de facto borrowing using instalment warrants by announcing the legislation before the Senate. The ATO, as regulator of Australia's 360,000 self-managed funds, and APRA backed off from a crackdown given the imminent change in the law.
Trustee members have had good reason to feel confused. Numerous self-managed funds have long used instalment warrants to buy mainly equities and investment funds. And some product promoters had gained ATO product rulings that Richards understands were limited to the tax aspects rather than the prohibition on borrowings by super funds.
Richards says that although the borrowing provisions before the Senate are under the heading of "instalment warrants", the changes will simply open the way for funds to borrow with or without warrants, provided the new borrowing rules set out in the legislation are strictly
followed.
The bill will allow a self-managed fund to borrow to invest, provided the asset is held in trust for the fund until it acquires legal ownership after final payment, and the lender cannot make a claim against any of the fund's assets in the event of default - other than the one related to the
borrowing.
Richards says that borrowing arrangements under the bill will enable self-managed funds to receive an income from the asset being purchased while it is held in trust. Interest on the loan will be deductible, and capital gains tax will not be triggered when it is transferred from the trust to the fund.
Vincent Scully, chief executive of boutique financial services group Calliva, says the passing of the bill will clear away the uncertainty involving borrowing to invest by self-managed funds. "Any uncertainty [in the financial industry] is bad," Scully says. "Now the ground rules have changed."
Scully argues that borrowing to invest provides self-managed funds with a smart way to deal with the new super regime from July that limits annual contributions by members yet makes super much more effective with tax-free benefits for those over 60. "You can build up the appreciating assets in your super [by borrowing to invest], making your super money work
much harder." Richards is among the professional advisers who believe that the bill will provide tremendous confidence for self-managed funds to gear to borrow to buy the commercial and residential properties of their choice.
Many self-managed funds have been unable to directly own residential and commercial properties because the cost far exceeded the members' super savings and because of the bar against borrowing.A superannuation writer with publisher Thomson ATP, Stuart Jones, warns in the Australian
Financial Planning Handbook 2007-08 that under the bill a self-managed fund will only be allowed to borrow to buy assets that are permitted under super law. A fund is barred, for example, from acquiring residential property from a member but can acquire business property from members.
Melbourne superannuation lawyer Dan Butler, principal of DBA Butler, urges self-managed funds to take extreme care about borrowing to buy properties. Members' retirement savings could be jeopardised if the property fell significantly in value. Butler says that products with packaged finance generally charge higher-than-market interest rates because of their inability to make a claim against assets of the fund, other than the asset
involved in the transaction, in the event of a default. He predicts more self-managed negotiate their own financing arrangements.
The Act received Royal Ascent early in October and we have already started the ball rolling on the processing of 2 loan applications for SMSF's
Very interesting Richard
Does that mean that all those people who sold properties to put the money into super will now be looking to back properties with gearing through their super . If that is so , it could really stimulate the property market.
If you can only take out 4 % of the funds value , having a property with good capital growth but a relatively low return could look more attractive for some people packaged into a super fund. Initially geared to be roughly revenue neutral , but paying off with subsequent contributions.
I know that you can't sell current personal residenntial properties into a super fund , but can you do that from a family trust ?
Cliff
Does that mean that all those people who sold properties to put the money into super will now be looking to back properties with gearing through their super . If that is so , it could really stimulate the property market.
If you can only take out 4 % of the funds value , having a property with good capital growth but a relatively low return could look more attractive for some people packaged into a super fund. Initially geared to be roughly revenue neutral , but paying off with subsequent contributions.
I know that you can't sell current personal residenntial properties into a super fund , but can you do that from a family trust ?
Cliff
simple
Hi sea change
The 4% figure you refering is not a maximum.
From 55 years of age, you can retire full time (if you have enough money) or you can do a TTR (transition to retirement).
If you retire Full time, you can withdraw around $130k lump sum..... tax free,
and a MINIMUM of "4% "...and max of 10% per year from your fund.
If you do a TTR, (that is keep working but have access to your super) you CANNOT take the lump sum , but you can access the MINIMUM of "4% "...and max of 10%.
Yes you pay 15% tax on these withdrawals (from 55 - 60 years) ...BUT you get a 15% REBATE up to alimit...therefore you could end up paying 0% tax.
But the best bit is when you turn 60 and you retire
Its all tax free.
Including ALL the income it earns.
For example, I have a commercial property sitting in my SMSF, earning 100k.
Currently I pay 15K of tax. As I will be starting a TTR this year the earning will be tax free.
Simple.
Hi sea change
The 4% figure you refering is not a maximum.
From 55 years of age, you can retire full time (if you have enough money) or you can do a TTR (transition to retirement).
If you retire Full time, you can withdraw around $130k lump sum..... tax free,
and a MINIMUM of "4% "...and max of 10% per year from your fund.
If you do a TTR, (that is keep working but have access to your super) you CANNOT take the lump sum , but you can access the MINIMUM of "4% "...and max of 10%.
Yes you pay 15% tax on these withdrawals (from 55 - 60 years) ...BUT you get a 15% REBATE up to alimit...therefore you could end up paying 0% tax.
But the best bit is when you turn 60 and you retire
Its all tax free.
Including ALL the income it earns.
For example, I have a commercial property sitting in my SMSF, earning 100k.
Currently I pay 15K of tax. As I will be starting a TTR this year the earning will be tax free.
Simple.
Public service super
I was told by a financial adviser to contribute 5% as the government 'matches' whatever contribution you make up to 5%, subject to the 10-year rule. After 10 years, contribute 10% as the government will then 'match' that. I write match in quote marks because I looked on my statements for the government's contribution, but then realised that it doesn't appear until you retire, as it is an unfunded contribution, and therefore, incidentially, subject to tax. Do a calculation - there's not a huge difference between 2% and 5%, so if you can afford it, maybe do the 5%. I see super as a bit of an insurance policy rather than dead money. PSS is not subject to market fluctuations. Dallee
I was told by a financial adviser to contribute 5% as the government 'matches' whatever contribution you make up to 5%, subject to the 10-year rule. After 10 years, contribute 10% as the government will then 'match' that. I write match in quote marks because I looked on my statements for the government's contribution, but then realised that it doesn't appear until you retire, as it is an unfunded contribution, and therefore, incidentially, subject to tax. Do a calculation - there's not a huge difference between 2% and 5%, so if you can afford it, maybe do the 5%. I see super as a bit of an insurance policy rather than dead money. PSS is not subject to market fluctuations. Dallee
Super not really all that bad afterall?
According to the Super projection for both my wife and I, we'll be looking at a combined accumulation of approximately $5.3 million which for us would be approximately $400K/pa combined over our retirement years. Apparently in "todays dollars" this will be around $1.75 million and $122K/pa - hopefully tax free.
While it's probable that we'll have less as my wife will likely reduce to part-time work during family-raising years, this is still nonetheless reasonably impressive. I can't see any reason to reduce our contributions below 5% as we'll not only lose Federal co-contributions (while they last) but also employer contributions of 12.5%.
My plan, of course, is to have a substantial IP portfolio which would allow an early and comfortable retirement which will only be boosted by our substantial superannuation payouts.
According to the Super projection for both my wife and I, we'll be looking at a combined accumulation of approximately $5.3 million which for us would be approximately $400K/pa combined over our retirement years. Apparently in "todays dollars" this will be around $1.75 million and $122K/pa - hopefully tax free.
While it's probable that we'll have less as my wife will likely reduce to part-time work during family-raising years, this is still nonetheless reasonably impressive. I can't see any reason to reduce our contributions below 5% as we'll not only lose Federal co-contributions (while they last) but also employer contributions of 12.5%.
My plan, of course, is to have a substantial IP portfolio which would allow an early and comfortable retirement which will only be boosted by our substantial superannuation payouts.
Sorry, missed the post.
I understand employer contributions are not taxed (whereas the money would be fully taxable if received in hand). Further any gains made inside super is subject to a lower tax regime.
Cheers,
The Y-man
Super is very generous tax wise. For those on high tax rates it's an easy way to reduce your tax bill AND to use that money for investment purposes.
The new tax free rules have also made a big difference in enhancing Supers appeal.
It doesn't take long with salary sacrificing before you have enough money in super to buy an investment property outright.
The new tax free rules have also made a big difference in enhancing Supers appeal.
It doesn't take long with salary sacrificing before you have enough money in super to buy an investment property outright.
Residential property investment doesn't make much sense without leverage: I can get better ungeared returns using shares. Why is buying an investment property outright a good investment?
In any case, the biggest issue is that you have to wait until 55 - 60 for tax free withdrawals.
Alex
