Keeping superannuation balance under $500K - pros and cons?

[wylie]

We are planning on transferring 85% of hubby's salary sacrificed contributions to his super for the last financial year to my superannuation account with the same company. This will keep his account balance under $500K which may or may not be of benefit if he works again and/or sells a property.

The legislation has not passed that will change the sacrifice value from $50K per annum down to $25K per annum, but if it does change, apparently those with balances under $500K will still be able to put in $50K per annum.

I have little knowledge of all this, and hopefully have this right, but would be happy to hear from anybody who knows more. I don't see a downside to transferring his super to me as it is all "ours" but would appreciate hearing any possible downside.

First chap I called at the superannuation company treated me like an annoyance and questioned my reasons, said the legislation was not passed, and if it did, it is likely it would be "wound back" three years so transferring now may not help us.

Our accountant said "not a bad thought but as hubby is not currently working he is unlikely to want to contribute $50000 per year next year. However it may provide future benefit because once hubby's balance exceeds $500000 he will have a maximum concessional contribution limit of $25000 per annum from 1st July 2012. Using the form in the link below he can request that 85% of his employer contributions be transferred to you."

I was told this has to be done before some time in March and not wanting to waste time using the wrong form, I called the superannuation company this morning to check whether the ATO form sent by accountant is one they will accept or if they require their own form and was made to feel like a dufus once more. This chap hadn't heard of the possible change in legislation, didn't understand why I wanted to do this, but said to send the form in.

So, any thoughts on this would be appreciated.

 

[MIW]

Legislation not approved yet but maybe!

We are planning on transferring 85% of hubby's salary sacrificed contributions to his super for the last financial year to my superannuation account with the same company. This will keep his account balance under $500K which may or may not be of benefit if he works again and/or sells a property.

The legislation has not passed that will change the sacrifice value from $50K per annum down to $25K per annum, but if it does change, apparently those with balances under $500K will still be able to put in $50K per annum.

I have little knowledge of all this, and hopefully have this right, but would be happy to hear from anybody who knows more. I don't see a downside to transferring his super to me as it is all "ours" but would appreciate hearing any possible downside.

First chap I called at the superannuation company treated me like an annoyance and questioned my reasons, said the legislation was not passed, and if it did, it is likely it would be "wound back" three years so transferring now may not help us.

Our accountant said "not a bad thought but as hubby is not currently working he is unlikely to want to contribute $50000 per year next year. However it may provide future benefit because once hubby's balance exceeds $500000 he will have a maximum concessional contribution limit of $25000 per annum from 1st July 2012. Using the form in the link below he can request that 85% of his employer contributions be transferred to you."

I was told this has to be done before some time in March and not wanting to waste time using the wrong form, I called the superannuation company this morning to check whether the ATO form sent by accountant is one they will accept or if they require their own form and was made to feel like a dufus once more. This chap hadn't heard of the possible change in legislation, didn't understand why I wanted to do this, but said to send the form in.

So, any thoughts on this would be appreciated.

Just rang my accountant today and he confirmed that for year 2012 if you're over 50 then you can still contribute $50K, and that's what I plan to do for my hubby. I can only put in $25K based on my age.
The legislation to approve the change to cap contrbutions for over 50's to $25K from $50K if the member's account is above $500K are being looked at but have not been passed yet.
I would agree with you strategy as you would have the structure in place incase the changes go through (I think more likely they may).
Your case is however different to ours as you give the money to third party that runs your Super.
We run our own SMSF and have total control over the decisions and products we invest. Unfortunately if they do bring in the changes both of us would be over $500K so max we could put would be $25K each.
Why not set up your own SMSF and have total control over it....just a thought.
By the way it's your money so please keep annoying them to death....

 

[sanj]

i had a similar thought too, with over 500k combined betw the 2 of you id be looking at SMSF for sure. hate the idea of someone else managing my money

 

[wylie]

For those who do have their own SMSF, what do you to do keep on top of things, and decide where it is invested?

We know nothing about shares, and don't want to "learn" whilst risking losing more money that we have already with our super. I would be happy to buy an income producing house with it, but the return on that is possibly less than the return we get from the shares it is invested in now. Plus the fact that ALL our investments would then be in bricks and mortar.

Like many people have experienced, our super has fallen in value, but the category it is invested in didn't do much better or worse than any of the other categories we could move it to within the choices of the fund (except maybe cash - but I don't think that is the right choice either).

I believe we could do a LOT worse than the fund managers who are already looking after it. I'd be happy to consider a SMSF if I felt happy that we could do as good a job as is being done now, but I'm not sure of that.

So, like many other areas in my life, I take the easiest path... do nothing .

 

[MIW]

100% control of SMSF!

For those who do have their own SMSF, what do you to do keep on top of things, and decide where it is invested?

We know nothing about shares, and don't want to "learn" whilst risking losing more money that we have already with our super. I would be happy to buy an income producing house with it, but the return on that is possibly less than the return we get from the shares it is invested in now. Plus the fact that ALL our investments would then be in bricks and mortar.

Like many people have experienced, our super has fallen in value, but the category it is invested in didn't do much better or worse than any of the other categories we could move it to within the choices of the fund (except maybe cash - but I don't think that is the right choice either).

I believe we could do a LOT worse than the fund managers who are already looking after it. I'd be happy to consider a SMSF if I felt happy that we could do as good a job as is being done now, but I'm not sure of that.

So, like many other areas in my life, I take the easiest path... do nothing .

Wylie,

Basically I became an active investor from a passive one as I read somewhere that nobody will take better control of your money than yourself. I liked the idea of control and at least I thought if I made a mistake I will have only myself to blame.
My background is in the IT so I always took interest into graphs, thus shares, and made 3000% on one. That permited to buy 3 IPs for cash which in themselves generate income (be aware I attended share trading courses).
In addition, few years back I invested into physical commodities (silver/gold) as an insurance or hedge if you like incase our currency loses value. I understood there's a difference between currency and money (money has value whereas the currency just represents your purchasing power at a point in time).
I am a huge advocate of Robert Kiyosaki's (RK) books, mentors, and his strategies. I strive to produce multiple sources of income and eventually to retire in the fourth Quadrant from income generated by investments only. Actually, our Super currently generates around $120K gross (just from properties and cash without any additional contributions) and then we have other investments there too (a private IPO that may float this year, commodities, etc...)
Finances are my hobbies so I constantly learn and then I take on some risks.
It's not for most people unless you decide to become fully engaged. So I wouldn't advocate you do that if you do not have any knowledge.
You see I have learned along the way that all assets become overvalued, return to their mean, and undervalued and if you can switch or at least contribute to the right asset class when it's undervalued than you will be so far ahead. But please be clear it's not an easy excercise by all means.
As to private IPOs well RK explains that well in one of his books, but my hubbies geology friends contributed with that (so knowing the people in that industry helps).
Now I am at a stage that I wish to structure the Super so that any extra IPs purchased with a loan would be paid of in 8 years time without requiring any contributions (benefits hubby retirement plus I do not like cash in the bank).
So I know that no matter what happens we already have enough in our Super, but we invested and took 100% control over it since 1995 (perhaps we were fortunate whereas many people were not).
I suppose it's like being a full time economist with calculated risk taking appetite...
I should point out that when I worked as a Senior analyst programmer one of my projects was to program all those fees into Managed Funds (entry fee, switching fee, withdrawal fee, management fee, exit fee, whatever, the company that provides those products will always get paid no matter what you do - So can you guess....? I never liked them...)
In addition you need a professional team around you to guide you with the responsibilities of being a trustee in your SMSF.

 

[sanj]

For those who do have their own SMSF, what do you to do keep on top of things, and decide where it is invested?

ours is a slightly different one as im in a SMSF with my folks (who i work with) and my brother who has his own business.

im no shares guru so am naturally a bit hesitant with it but we do have some of it in shares. some we have in a commercial property syndicate that is returning ok returns at the moment, we first looked at it as someone we know and trust who is a pretty good mix of conservative and savvy was putting some money into it too.

we have also put some money into a couple of start ups that people we know are involved in, some here and some in singapore. one of them is hoping to list in either singapore or hong kong in 12-15 months which will hopefully mean a healthy return. so far they have met their targets so im quietly hopeful

our situation is a little different though, as we moved here only in 1997 my folks super started pretty late and it is viewed more as a bonus than something to rely on. because of that we can take some calculated punts i guess

 

[brucea]

...I don't see a downside to transferring his super to me as it is all "ours" but would appreciate hearing any possible downside...

Before you decide what to do (and my first inclination is that keeping under a $500K balance if all else were equal would be a good thing to do) compare your relative preservation ages as well. You might find some benefit in growing the balance of the older of the two of you so that the money is more quickly accessible by starting an income stream, or you might find some benefit in growing the balance of the younger of the two of you so that more money is kept safe from Centrelink's asset test for as long as possible.