Author Topic: Superannuation thread  (Read 1464 times)

marty998

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Superannuation thread
« on: October 18, 2017, 02:35:17 AM »
Would like to start a discussion here about super, break it out of the Australian Investing thread which is more general.

Been thinking about an article Judith Sloan wrote in the AFR earlier this week about Super. It was an interesting rant given her ideological bent.

Thrust of her argument is that Super is a drag on the economy (because people can't spend the money now) and that accumulating "forced" savings prevent people from accessing their full age pension entitlements because they have too much assets(!) and the effective marginal tax rate is over 50% for superannuants because they lose age pension income for having more super income. Would never have imagined she would be a champion for the welfare state...

Anyway, despite the above, I didn't post this topic to argue about that in particular. I just wanted to start a thread here about Super in general.

My balance has been ticking up nicely, aided by a stockmarket that is having a good run lately. It's also been beneficial to my dad who is drawing a super pension. Despite the usual advice for older people to switch to more conservative asset allocations as they enter retirement, he has kept his portfolio in the default balanced option. Amazing how his account continues to grow, I'm pretty confident the parents will never run out of money now which is great.

GT

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Re: Superannuation thread
« Reply #1 on: October 19, 2017, 09:31:30 PM »
Mine is climbing nicely ($4K since the start of the month) considering I'm no longer working and my last input from employer was just $25 in September.

BUT.

I just received notice that my provider,Aus Ethical, is changing administrator to Mercer.  I'd never even heard of Mercer before.  They're also changing the name of my investment choice from Smaller Companies to Australian Shares, which I find misleading and now implies that it's just investing in the Aus Index.

As I only worked until August of this year I'll be looking at contributing some cash of our own into my Super this year to get the governments matching bonus.  Just not sure when to add it, now, or in June.

marty998

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Re: Superannuation thread
« Reply #2 on: October 21, 2017, 04:02:08 AM »
Yeesh, Mercer has some very high fee options. Look at them very carefully to see if it's right for you.

More and more fund managers are closing down their "Core" Australian share teams and focussing on niche sectors (like small caps, or high conviction funds). It's very difficult to outperform a concentrated market like the ASX on a consistent basis without taking on extra risk.

AMP is the latest big name to close down the Core Australian shares option.


Grogounet

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Re: Superannuation thread
« Reply #3 on: November 01, 2017, 11:29:56 PM »
Hostplus - Balanced index
Lowest fees around

Other questions? :-)))

middo

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Re: Superannuation thread
« Reply #4 on: November 02, 2017, 12:21:33 AM »
I just saw this thread after posting my superannuation question in the investing thread.  Oh well.  Posting to follow!

happy

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Re: Superannuation thread
« Reply #5 on: November 02, 2017, 04:03:07 AM »
PTF
Journalling at Happy Aussie Downshifter

marty998

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Re: Superannuation thread
« Reply #6 on: November 02, 2017, 04:08:19 AM »
PTF

Why not "posting to contribute" Happy and Middo? :P

happy

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Re: Superannuation thread
« Reply #7 on: November 02, 2017, 04:16:40 AM »
Nothing to say right now Marty. Another day I might make a shaftingly brilliant contribution. ( ummm, how many have you had? ;))
Journalling at Happy Aussie Downshifter

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Re: Superannuation thread
« Reply #8 on: November 02, 2017, 04:22:51 AM »
My FIRE date will be ~20 years from when I can access super -- is there any point in maximizing the tax advantage now? Also I'm likely to get a bit of inheritance (or at least gifts) by the time I'd be old enough to get to the super, plus I'd be eligible for the age pension if I've got no money left by retirement age so this devalues it even more. How do other people here consider their super stash? I consider it only good for generational transfer.

marty998

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Re: Superannuation thread
« Reply #9 on: November 02, 2017, 05:20:57 AM »
My FIRE date will be ~20 years from when I can access super -- is there any point in maximizing the tax advantage now? Also I'm likely to get a bit of inheritance (or at least gifts) by the time I'd be old enough to get to the super, plus I'd be eligible for the age pension if I've got no money left by retirement age so this devalues it even more. How do other people here consider their super stash? I consider it only good for generational transfer.

Please do not aim so low that you rely on the age pension. It beggars belief that people prefer to shoot themselves in the foot to live off the pension, rather than accumulate a little bit more which will compound into a hell of a lot more income down the track.

Save enough into super now and you might find that you have a beautiful nest egg down the track giving you twice if not thrice the age pension.

marty998

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Re: Superannuation thread
« Reply #10 on: November 02, 2017, 05:22:04 AM »
Nothing to say right now Marty. Another day I might make a shaftingly brilliant contribution. ( ummm, how many have you had? ;))

Not many lately. I've always posted a few gems, interspersed among a fair bit of caustic crap :)

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Re: Superannuation thread
« Reply #11 on: November 02, 2017, 05:35:13 AM »
My FIRE date will be ~20 years from when I can access super -- is there any point in maximizing the tax advantage now? Also I'm likely to get a bit of inheritance (or at least gifts) by the time I'd be old enough to get to the super, plus I'd be eligible for the age pension if I've got no money left by retirement age so this devalues it even more. How do other people here consider their super stash? I consider it only good for generational transfer.

Please do not aim so low that you rely on the age pension. It beggars belief that people prefer to shoot themselves in the foot to live off the pension, rather than accumulate a little bit more which will compound into a hell of a lot more income down the track.

Save enough into super now and you might find that you have a beautiful nest egg down the track giving you twice if not thrice the age pension.

The issue is whether to save into index funds out of super (with limited tax advantage) or lock up funds with some tax advantage. With good returns for the period from when I retire until I can access super then the tax advantage doesn't matter, with terrible returns I might be forced to work again if I have too much in Super and not enough outside of Super. Having a more luxurious final 5 years of life is not worth anything to me, especially when compared to having 5 years of mid 40's life without working. Combined super is currently $230k with $350k in index funds and cash (slowly dropping the cash component). We're both 38, 2 kids, no debt, nice house.
« Last Edit: November 02, 2017, 05:48:01 AM by one piece at a time »

middo

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Re: Superannuation thread
« Reply #12 on: November 02, 2017, 05:37:56 AM »
All right, contribution it is.  I wasn't doing anything with super other than the 9.5% govt. SG.  I earn $105,000 before tax.  As Notch and others said in the Australian Investing thread, I really should be using the tax dodges offered by the government.  I think I will be talking to my employer in a few weeks time when I come back from Long Service Leave.  (Not stepping in the door for anything until my leave is over.)

So I will be contributing more....

middo

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Re: Superannuation thread
« Reply #13 on: November 02, 2017, 05:40:44 AM »
My FIRE date will be ~20 years from when I can access super -- is there any point in maximizing the tax advantage now? Also I'm likely to get a bit of inheritance (or at least gifts) by the time I'd be old enough to get to the super, plus I'd be eligible for the age pension if I've got no money left by retirement age so this devalues it even more. How do other people here consider their super stash? I consider it only good for generational transfer.

I also have concerns about super.  I'm 47, so it is a lot closer than you obviously, but recently the date I can start collected shifted out by 5 years.  Will that happen again?  I need other assets to ensure it is not an issue before I pull the pin.

marty998

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Re: Superannuation thread
« Reply #14 on: November 02, 2017, 02:18:37 PM »
My FIRE date will be ~20 years from when I can access super -- is there any point in maximizing the tax advantage now? Also I'm likely to get a bit of inheritance (or at least gifts) by the time I'd be old enough to get to the super, plus I'd be eligible for the age pension if I've got no money left by retirement age so this devalues it even more. How do other people here consider their super stash? I consider it only good for generational transfer.

Please do not aim so low that you rely on the age pension. It beggars belief that people prefer to shoot themselves in the foot to live off the pension, rather than accumulate a little bit more which will compound into a hell of a lot more income down the track.

Save enough into super now and you might find that you have a beautiful nest egg down the track giving you twice if not thrice the age pension.

The issue is whether to save into index funds out of super (with limited tax advantage) or lock up funds with some tax advantage. With good returns for the period from when I retire until I can access super then the tax advantage doesn't matter, with terrible returns I might be forced to work again if I have too much in Super and not enough outside of Super. Having a more luxurious final 5 years of life is not worth anything to me, especially when compared to having 5 years of mid 40's life without working. Combined super is currently $230k with $350k in index funds and cash (slowly dropping the cash component). We're both 38, 2 kids, no debt, nice house.

Ok lets lay this out... Couple, 38, FIRE date ~2 years from now? (20 years from access to Super age (60))

The $230k in Super you have now @7% after tax returns will compound to $890k at 60. That will give you a pension of $36,000 a year, and if history is any guide, by the time the minimum pension rates ratchet up at age 65 and 70 your original $890k will have grown quite substantially as well.

This assumes you don't contribute anything more to super at all over the next 22 years. Contribute even $10k a year between you (from savings or part-time work, whatever) and you can see where your balance is heading.

People think it's the norm for Super nest egg balances to come down, when in reality, past a certain threshold, they're likely to simply keep going up in retirement.

You've got $350k non super investments now, plus whatever equity in your current house (option of downsizing etc etc)

You only really need a strategy to get you through the next 22 years now - $350k is probably not enough, $1m is probably too much (assuming your spending is not outrageously high).

Not enough info to figure it out, but it seems you're well on your way :)

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Re: Superannuation thread
« Reply #15 on: November 02, 2017, 03:25:31 PM »

You only really need a strategy to get you through the next 22 years now - $350k is probably not enough, $1m is probably too much (assuming your spending is not outrageously high).

Not enough info to figure it out, but it seems you're well on your way :)

Thanks, that is what I needed to hear. I've got very little idea about how much we'll be spending as the kids get older, but it does seem the critical time is from now until 60 (or 65 or 70 depending on how they change the rules), with Super taking care of itself from the next few years of work. Work is quite fun and the hours are fantastic (home before the kids most days), so I'm not giving up on too much by doing "one more year". Probably wait until kids leave home until I completely retire.

FWIW our house is only nice by Mustaschian standards, not a great deal of equity from downsizing is available (already in a low COL area).

ozbeach

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Re: Superannuation thread
« Reply #16 on: November 02, 2017, 03:46:37 PM »
I also have concerns about super.  I'm 47, so it is a lot closer than you obviously, but recently the date I can start collected shifted out by 5 years.  Will that happen again?  I need other assets to ensure it is not an issue before I pull the pin.

Recently? Is this correct? I remember being bummed out some time in the 80s (maybe 90s?) when I learned that my preservation age had shifted from 55 to 59 (yay, one year earlier than those born after me) but that preservation age hasn't shifted (as far as I am aware) since then.
Late to FI; but better late than never!

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Re: Superannuation thread
« Reply #17 on: November 02, 2017, 04:31:30 PM »
I also have concerns about super.  I'm 47, so it is a lot closer than you obviously, but recently the date I can start collected shifted out by 5 years.  Will that happen again?  I need other assets to ensure it is not an issue before I pull the pin.

Recently? Is this correct? I remember being bummed out some time in the 80s (maybe 90s?) when I learned that my preservation age had shifted from 55 to 59 (yay, one year earlier than those born after me) but that preservation age hasn't shifted (as far as I am aware) since then.

That might be true.  I may be thinking of pension age. But the point was that fiddling with the super rules by successive governments have not given me great confidence in my access to my superannuation when I want it.

mjr

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Re: Superannuation thread
« Reply #18 on: November 02, 2017, 04:58:59 PM »
When there was discussion (by the Coalition) of lifting the preservation age, they were talking about making it 5 years earlier than the pension age.  They were also mooting lifting the pension age to 70.

However, there seems to be no current talk of lifting either and even if the preservation age was to come back onto the scene, it would move from 60 to 62.

I'm not planning on cutting it so fine that a year here or there of the preservation age makes any difference.

I would think that the biggest change to super that could come in the foreseeable future is removing lump sum withdrawals to force people to take allocated pensions or annuities and stop retirees blowing it all on a cruise and then getting the pension.

Gremlin

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Re: Superannuation thread
« Reply #19 on: November 02, 2017, 09:08:04 PM »
Nothing to say right now Marty. Another day I might make a shaftingly brilliant contribution. ( ummm, how many have you had? ;))

Not many lately. I've always posted a few gems, interspersed among a fair bit of caustic crap :)
Not overly active poster myself but reckon Marty is selling himself short.  Id say the occasional caustic crap, interspersed among a fair few gems.  Seriously, I dig your work Marty!

Primm

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Re: Superannuation thread
« Reply #20 on: November 02, 2017, 11:19:34 PM »
Hostplus - Balanced index
Lowest fees around

Other questions? :-)))

Scott Pope fan? ;)

marty998

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Re: Superannuation thread
« Reply #21 on: November 03, 2017, 02:19:17 AM »
Nothing to say right now Marty. Another day I might make a shaftingly brilliant contribution. ( ummm, how many have you had? ;))

Not many lately. I've always posted a few gems, interspersed among a fair bit of caustic crap :)
Not overly active poster myself but reckon Marty is selling himself short.  Id say the occasional caustic crap, interspersed among a fair few gems.  Seriously, I dig your work Marty!

Thanks Gremlin ;)

When there was discussion (by the Coalition) of lifting the preservation age, they were talking about making it 5 years earlier than the pension age.  They were also mooting lifting the pension age to 70.

However, there seems to be no current talk of lifting either and even if the preservation age was to come back onto the scene, it would move from 60 to 62.

I'm not planning on cutting it so fine that a year here or there of the preservation age makes any difference.

I would think that the biggest change to super that could come in the foreseeable future is removing lump sum withdrawals to force people to take allocated pensions or annuities and stop retirees blowing it all on a cruise and then getting the pension.

I think there'll be further limiting of the tax concessions and how much you can put away. I doubt the age at which you can access it will shift too much.

The point the Government has clearly made (quite rightly I might add) if for people to actually spend it down and not use it for estate planning.

What is always forgotten is that even if your minimum drawdown from super exceeds your spending needs, there is nothing stopping you from investing that excess outside of super.

Amazing how that fact is lost on everyone.

GT

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Re: Superannuation thread
« Reply #22 on: November 03, 2017, 05:03:26 AM »
Hostplus - Balanced index
Lowest fees around

Other questions? :-)))

Scott Pope fan? ;)

Scott Pape even. ;)

I'm more interested in their Choiceplus options.  I can use that to access Vanguard funds.

Luckyvik

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Re: Superannuation thread
« Reply #23 on: November 03, 2017, 02:47:05 PM »
Mine is climbing nicely ($4K since the start of the month) considering I'm no longer working and my last input from employer was just $25 in September.

BUT.

I just received notice that my provider,Aus Ethical, is changing administrator to Mercer.  I'd never even heard of Mercer before.  They're also changing the name of my investment choice from Smaller Companies to Australian Shares, which I find misleading and now implies that it's just investing in the Aus Index.

As I only worked until August of this year I'll be looking at contributing some cash of our own into my Super this year to get the governments matching bonus.  Just not sure when to add it, now, or in June.
1. Mercer is a large Superannuation administrator many funds outsource their administration of the fund I.e. Processing of contributions, payments , call centre etc to Mercer or to Link the other big administrator eg. Virgin Super, First State Super, Qantas Super etc.

2. If you were only working till Aug, you can now make an after-tax contribution and claim a tax deduction up to the $25k concessional cap this financial year (you no longer need to be self-employed).


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Luckyvik

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Re: Superannuation thread
« Reply #24 on: November 03, 2017, 02:59:33 PM »
When there was discussion (by the Coalition) of lifting the preservation age, they were talking about making it 5 years earlier than the pension age.  They were also mooting lifting the pension age to 70.

However, there seems to be no current talk of lifting either and even if the preservation age was to come back onto the scene, it would move from 60 to 62.

I'm not planning on cutting it so fine that a year here or there of the preservation age makes any difference.

I would think that the biggest change to super that could come in the foreseeable future is removing lump sum withdrawals to force people to take allocated pensions or annuities and stop retirees blowing it all on a cruise and then getting the pension.
Re: Preservation age, yes I think that changed a very long time ago, if they change it again they will have to tier it so that like they did with moving it from 55-60 I reckon they would make it so it only affects 30 year olds now as to not piss off older voters.

Re: removing lump sump withdrawals again this is so unpopular that I don’t think they would implement this for many years.

I personally hedge my bets, on top of the 9.5% I salary sacrifice up to the concessional cap of $25k, about $15k a year for me, I rather get the extra money in my super account than pay it to the tax man (free money!) but I don’t put any after-tax Money in. I’m saving outside of Super for my pre-60 stash.


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Primm

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Re: Superannuation thread
« Reply #25 on: November 03, 2017, 04:16:24 PM »
Hostplus - Balanced index
Lowest fees around

Other questions? :-)))

Scott Pope fan? ;)

Scott Pape even. ;)

I'm more interested in their Choiceplus options.  I can use that to access Vanguard funds.

Goddam autocorrect...

kiwiozearlyretirement

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Re: Superannuation thread
« Reply #26 on: November 09, 2017, 07:47:08 AM »
I was also very interested in the choice plus option but it seems very difficult to access it in a cost effective meaningful way. For example if you want to invest in an ETF this is classed as one single share. You cannot invest more than 20% in any one share and this proportion must remain the same at all times. You cannot invest more than 80% in total in shares, therefore you might leave 20% in the balanced index fun. So if you invest $5000 and you invest $1000 in VAS, 1000 in VGS, 1000 in VTS, 1000 in VEU you have to leave 1000 remaining in the balanced index fund for example. But this means you will pay $100 (4 x $25) in brokerage which means a significant drag on your performance. I asked them about this and they accept the restrictions are to promote diversification but accept saying an ETF is a single share makes no sense. They have no plans to change this at this time.

GT

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Re: Superannuation thread
« Reply #27 on: November 09, 2017, 02:07:51 PM »
I was also very interested in the choice plus option but it seems very difficult to access it in a cost effective meaningful way. For example if you want to invest in an ETF this is classed as one single share. You cannot invest more than 20% in any one share and this proportion must remain the same at all times. You cannot invest more than 80% in total in shares, therefore you might leave 20% in the balanced index fun. So if you invest $5000 and you invest $1000 in VAS, 1000 in VGS, 1000 in VTS, 1000 in VEU you have to leave 1000 remaining in the balanced index fund for example. But this means you will pay $100 (4 x $25) in brokerage which means a significant drag on your performance. I asked them about this and they accept the restrictions are to promote diversification but accept saying an ETF is a single share makes no sense. They have no plans to change this at this time.

Eww, that's not a good option at all then.

deborah

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Re: Superannuation thread
« Reply #28 on: November 09, 2017, 08:30:24 PM »
Is anyone putting property into their SMSF? I was talking to someone today who said that the majority of people with an SMSF tend to do this, and I think it is silly, but if someone has good reasons for this, I am prepared to listen.

mjr

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Re: Superannuation thread
« Reply #29 on: November 09, 2017, 09:59:17 PM »
I can see why people who want property in their portfolio set up a SMSF, but the reverse doesn't necessary follow.

I have no property in my SMSF.

bigchrisb

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Re: Superannuation thread
« Reply #30 on: November 09, 2017, 11:56:33 PM »
No residential property in mine.  Commercial is a different story

Rowellen

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Re: Superannuation thread
« Reply #31 on: November 10, 2017, 01:37:23 AM »
Is anyone putting property into their SMSF? I was talking to someone today who said that the majority of people with an SMSF tend to do this, and I think it is silly, but if someone has good reasons for this, I am prepared to listen.

I'm an SMSF administrator and tax agent. I can count on my fingers the number of clients that have had property in their SMSF in the last 10 years. Most of those are commercial. Only two have had LRBAs. I would suggest that whoever said that is talking out their arse. Also ATO stats would not agree with that statement either.

Ozstache

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Re: Superannuation thread
« Reply #32 on: November 10, 2017, 04:38:05 PM »
The changes last year with super pension phase caps and how defined benefit pensions are counted means I am already at my cap. so no more going into super for me. With my wife at age 52 and a low super balance, we will concentrate on loading hers up instead and will be putting all excess cash to concessional contributions, which I believe we can near double to $50K by putting half through my super then splitting it off to hers.

deborah

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Re: Superannuation thread
« Reply #33 on: November 10, 2017, 04:44:27 PM »
But if you are at your cap, I don't think you can ever add any more to yours - or am I wrong?

Rowellen

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Re: Superannuation thread
« Reply #34 on: November 10, 2017, 06:16:04 PM »
You can still add concessional contributions. Just can't add non-concessional contributions, once over $1.6m.

Ozstache

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Re: Superannuation thread
« Reply #35 on: November 10, 2017, 06:42:05 PM »
I need to research it more to confirm before I do it but I believe that I can contribute $25K concessional amount to my super, then transfer 85% of that to my wife's super (the other 15% is the tax going in). This does not affect her concessional cap, so she can put in $25K concessional amount too.

Re contributing above the cap, I believe that you can in any case its just that it has to stay in the accumulation phase, and hence subject to 15% earnings tax annually.  By income splitting the way I plan to, everything that goes in either gets transferred to my wife or gobbled up in contributions tax. I will not do this until I am absolutely sure it is a legit strategy under super rules.

Rowellen

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Re: Superannuation thread
« Reply #36 on: November 10, 2017, 06:56:19 PM »
I need to research it more to confirm before I do it but I believe that I can contribute $25K concessional amount to my super, then transfer 85% of that to my wife's super (the other 15% is the tax going in). This does not affect her concessional cap, so she can put in $25K concessional amount too.

Re contributing above the cap, I believe that you can in any case its just that it has to stay in the accumulation phase, and hence subject to 15% earnings tax annually.  By income splitting the way I plan to, everything that goes in either gets transferred to my wife or gobbled up in contributions tax. I will not do this until I am absolutely sure it is a legit strategy under super rules.

Correct.

Also, once you reach a condition of release, eg reach age 60 and retired or reach age 65, you could pull out a lump sum and transfer it to your wife if she is still eligible to contribute. You could transfer $400k within a couple weeks if you time it correctly.

Ozstache

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Re: Superannuation thread
« Reply #37 on: November 10, 2017, 07:19:44 PM »
I need to research it more to confirm before I do it but I believe that I can contribute $25K concessional amount to my super, then transfer 85% of that to my wife's super (the other 15% is the tax going in). This does not affect her concessional cap, so she can put in $25K concessional amount too.

Re contributing above the cap, I believe that you can in any case its just that it has to stay in the accumulation phase, and hence subject to 15% earnings tax annually.  By income splitting the way I plan to, everything that goes in either gets transferred to my wife or gobbled up in contributions tax. I will not do this until I am absolutely sure it is a legit strategy under super rules.

Correct.

Also, once you reach a condition of release, eg reach age 60 and retired or reach age 65, you could pull out a lump sum and transfer it to your wife if she is still eligible to contribute. You could transfer $400k within a couple weeks if you time it correctly.

That's good to know, thanks!

bigchrisb

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Re: Superannuation thread
« Reply #38 on: November 10, 2017, 08:00:17 PM »
I've been making use of concessional contributions up to the limit for almost a decade now. In the last year, I've also started making non concessional contributions.  I've started doing this  s I'm getting more confidence that I have enough in the non-super stash to see me through, and any extra may as well get the lower tax rates. The contribution limits are also driving this a little too. At the moment I can add 100k a year in post tax along with 25k pre tax. Once I hit 1.6m (still a fair way off) I can only put in the pre tax money. May as well get it in there while I can.

Nudelkopf

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Re: Superannuation thread
« Reply #39 on: December 01, 2017, 08:59:10 PM »
Please do not aim so low that you rely on the age pension. It beggars belief that people prefer to shoot themselves in the foot to live off the pension, rather than accumulate a little bit more which will compound into a hell of a lot more income down the track.

Save enough into super now and you might find that you have a beautiful nest egg down the track giving you twice if not thrice the age pension.
I agree with Marty. This makes me so mad when people / the media suggest people save as little as possible to keep the age pension - e.g. The Moneymag article that says you only need $275k in savings to retire.
http://moneymag.com.au/275k-super-retire/

... with terrible returns I might be forced to work again if I have too much in Super and not enough outside of Super. Having a more luxurious final 5 years of life is not worth anything to me, especially when compared to having 5 years of mid 40's life without working.
I love this thought. So true.

marty998

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Re: Superannuation thread
« Reply #40 on: December 01, 2017, 11:37:04 PM »
Mmm... that Money Mag one raised my eyebrows. I think it was intended to reassure people that they'll be ok if they don't have 1-1.5m, which is what the ASFA guidelines were for a comfortable retirement.

But it can get totally misinterpreted as "great news! Don't bother saving, because the government will look after you!"

People don't realise that by doing this they're essentially making life much harder for their kids.