Author Topic: Reviewed my superannuation - don't need to change!  (Read 4857 times)

Primm

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Reviewed my superannuation - don't need to change!
« on: April 06, 2014, 06:29:30 PM »
I'm the worlds most hopeless record keeper. I also don't have the inclination to invest in individual stocks, but I decided to set up a managed fund / index fund. But first I needed to review my super to max it out. I've been paying extra in but not really following it (bad Primm!).

So here there's a $25,000 limit on superannuation per year before you have to pay extra tax, and that ain't going to happen. When I sat down and added up how much I contribute already so I could top it up to the max, last year I paid in ... $24,600! Not a whole lot of wriggle room there.

Guess I'll be opening up that managed fund sooner than expected. :)

Kepler

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Re: Reviewed my superannuation - don't need to change!
« Reply #1 on: April 07, 2014, 03:46:07 AM »
I'm in the same situation - the concessional cap does rise next financial year, so worth revisiting then...

What after-tax investments are you looking at?

Primm

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Re: Reviewed my superannuation - don't need to change!
« Reply #2 on: April 07, 2014, 03:52:38 AM »
I didn't realise that, thanks!

Not sure yet. I'm looking at Vanguard. Something I can set the direct debit and forget about it.

marty998

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Re: Reviewed my superannuation - don't need to change!
« Reply #3 on: April 07, 2014, 04:28:26 PM »
Don't forget the non-concessional cap either. If you're over 50 just dump as much as you possibly can into super. A 0% tax on earnings in pension phase after you turn 60 is the biggest and best legal tax rort you will ever get in your life.

deborah

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Re: Reviewed my superannuation - don't need to change!
« Reply #4 on: April 10, 2014, 03:36:11 PM »
I assume you are talking about salary sacrifice. Just make sure you don't go over the $25,000 limit! The problem is that for many people, it isn't $25,000, but a bit less, because of the 9.25% employer contribution. I'm not sure how much of the employer contribution actually counts towards the $25,000 - it should say on your pay slip.

I am now retired, but I know that I had to be careful, and the most I could put in was $46,523 of a possible $50,000 (I was over 50).

marty998

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Re: Reviewed my superannuation - don't need to change!
« Reply #5 on: April 10, 2014, 04:16:34 PM »
All of your 9.25% counts towards the concessional cap of $25k. There's a real sting in the tail if you go over, the Tax Man will hit you with some pretty big penalty taxes.

Also if you are salary sacrificing, there are some dodgy employers out there who will calculate the 9.25% on your reduced post-salary sacrificed salary. This is illegal, and the 9.25% should be calculated on your pre tax gross earnings, which include salary sacrificed amounts.

Always check to make sure you are getting the right amounts. And always check to ensure your employer is paying your super in a timely manner. Some pay every 2 weeks, some pay every quarter.

Interestingly, speaking with a few friends who had "irregular" contributions from their employer. They look back and can see that irregular contributions are a tell tale sign that the business is/was in trouble, and it's time to start looking for a new job.

deborah

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Re: Reviewed my superannuation - don't need to change!
« Reply #6 on: April 10, 2014, 06:04:49 PM »
Marty has reminded me about other problems when calculating maximum salary sacrifice while bringing up some important points.

The reason I wasn't sure about how much of the 9.25% was counted was that in some jobs (eg. public service, and other places where you may be on a defined benefit pension, or where your salary is considered to be base salary + perks - like in banks) a different amount is counted (in my case it was less). Just check before you run into tax problems - you REALLY don't want to put in too much - there are very heavy tax penalties for this.

Secondly, companies that pay late (or by the quarter) may put in your last few pays of 9.25% AFTER the financial year has ended (this is legal, and can be cheaper for them). If they have done this, you won't be able to salary sacrifice as much in the following financial year as you may think. When I was salary sacrificing, I always checked every pay what had gone in where. HR got used to me querying my pay slip. This especially important if your pay varies (ie. you get paid overtime etc.). Also, log on to your fund each time and check that the right amount has gone into the fund.

Marty is correct that many companies that go under have outstanding superannuation payments to their employees.

Primm

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Re: Reviewed my superannuation - don't need to change!
« Reply #7 on: April 10, 2014, 06:10:00 PM »
I do keep an eye on it, because I'm fortunate in that my employer pays 12.5% if I match 5%. So that makes up a whole lot of my $25k and I don't need to contribute very much extra myself. We also have a really generous salary packaging option, before setting it up one of the requirements was a financial planner consultation even though I pretty much knew what I wanted, he had to sign off on it. He hadn't seen a package like it even in the government sector, and he was blown away.

I've been stung before with employers not paying in a timely manner and calculating on post-tax earnings. I eventually got it back, but it took some work. Not going down that path again. The calculator comes out every time I get a payslip now!

They're pretty good with reminding us too. One year (when we changed from defined benefit to accumulated - not my choice :( ) I got the email in January telling me to check my contributions because I was in danger of hitting the limit. And I work for a massive private hospital, so I'm pretty safe as far as job security goes. Possibly safer than government jobs, given the cuts to Qld Health staff recently.

It's only been recently I've been aware of the cap and paying extra, the last 2 years really. It's great that 14-15 is going to go up to $30k, but I hate that I missed out on the $50k that people used to get. Do you think they'll bring that back now that we have a change of government that are a bit more amenable to people covering their own costs in retirement?

deborah

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Re: Reviewed my superannuation - don't need to change!
« Reply #8 on: April 10, 2014, 07:43:41 PM »
Quote
It's only been recently I've been aware of the cap and paying extra, the last 2 years really. It's great that 14-15 is going to go up to $30k, but I hate that I missed out on the $50k that people used to get. Do you think they'll bring that back now that we have a change of government that are a bit more amenable to people covering their own costs in retirement?

Buckleys.

Once you could put as much as you liked into salary sacrifice, and you could get the co-contribution (because your after tax pay was so small), then they reduced it and reduced it. Pity I missed out on any of that. I wouldn't be surprised if they reduced it again (Hockey is saying even things that people expect are going with this budget). Sounds to me like they might put up the age you can access super (again).

Primm

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Re: Reviewed my superannuation - don't need to change!
« Reply #9 on: April 11, 2014, 01:06:15 AM »
So they want us to self-fund our own retirement but are making it as difficult as possible to do so. Sucks to be the responsible ones, doesn't it? Still, I'd rather be over the assets test limit than reliant on the pension, which I'm guessing will be well below the poverty line by the time we get there.

marty998

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Re: Reviewed my superannuation - don't need to change!
« Reply #10 on: April 11, 2014, 01:33:04 AM »

Secondly, companies that pay late (or by the quarter) may put in your last few pays of 9.25% AFTER the financial year has ended (this is legal, and can be cheaper for them). If they have done this, you won't be able to salary sacrifice as much in the following financial year as you may think.

Yes good point Deborah! Thats another sneaky issue everyone forgets about.

So they want us to self-fund our own retirement but are making it as difficult as possible to do so. Sucks to be the responsible ones, doesn't it? Still, I'd rather be over the assets test limit than reliant on the pension, which I'm guessing will be well below the poverty line by the time we get there.

Err..umm...no.... sorry, you can still contribute $150k a year post tax earnings, and there is absolutely nothing stopping you from saving outside of super to fund your retirement.

The government had to cut the concessional cap because it was such an incredible rort. What was happening was that over 55-year-old high income earners (who really don't need tax concessions) were salary sacrificing everything into super, being taxed at 15% instead of 46.5% and then drawing those same funds out of super as a Transition to Retirement tax free pension.

The government (whether liberal or labor in charge) had a problem that needed fixing. They didn't fix it fully, and its partly the reason why the budget is so fracked.

The Liberals created the problem when Costello abloished tax on pension earnings, and Labor spent 6 years making it progressively worse. Entire system needs a rethink because right now all the tax concessions go to the wealthiest, and low income earners actually get taxed more in super than outside.

deborah

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Re: Reviewed my superannuation - don't need to change!
« Reply #11 on: April 11, 2014, 02:44:40 AM »
The post tax superannuation contribution is really good value if the money is generating a lot of earnings, because all earnings from superannuation are taxed at 15% rather than your tax bracket. It also stops the money from bumping you up a tax bracket. However, I don't think you can access any super until your preservation age (including post tax contributions). So it seems to me that anyone wanting EARLY retirement needs to think clearly how much they actually need before pension age so they have the right balance in super and non-super. How do you intend to do this?

Quote
The Liberals created the problem when Costello abloished tax on pension earnings, and Labor spent 6 years making it progressively worse. Entire system needs a rethink because right now all the tax concessions go to the wealthiest, and low income earners actually get taxed more in super than outside.

I thought Labor progressively trimmed it (so from an economic view made it better), although it was a real pain never knowing how much you would be able to put in next year! Agree that the entire system needs a rethink. Many people seem to put money in to super and take it out the same year, and end up with a big splurge, so they can get the full aged pension.

When I started work, most people couldn't access super (it was limited to white collar workers in big companies and government). I remember joining BHP and the HR manager said there was no point in me joining super because I was a woman (and I believed him - stupid me). And it was a long time before there was any compulsory superannuation. My understanding is that Costello brought in concessional super to allow people who had missed out to top it up. But it was a very ill thought out plan, allowing a lot of rorting, particularly as the preservation age and pension age are not the same.

Primm

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Re: Reviewed my superannuation - don't need to change!
« Reply #12 on: April 11, 2014, 04:09:22 AM »
The post tax superannuation contribution is really good value if the money is generating a lot of earnings, because all earnings from superannuation are taxed at 15% rather than your tax bracket. It also stops the money from bumping you up a tax bracket. However, I don't think you can access any super until your preservation age (including post tax contributions). So it seems to me that anyone wanting EARLY retirement needs to think clearly how much they actually need before pension age so they have the right balance in super and non-super. How do you intend to do this?

Quite honestly, I don't know. A mix between investing in non-super index funds and paying off my mortgage to reduce expenses, as well as cutting other expenses. I also have a couple of crafty bones and am looking at doing some market type selling, but I know that won't be a huge money spinner. It's stuff I do for enjoyment anyway though, so the idea of making some money out of it may work.

My super preservation age is 60, and I'm 45 now and really just starting to hit all of this hard, so there's a good possibility I may not retire until then anyway. Plus I love my day job (NICU nurse) and actually right now couldn't imagine not getting to see my babies every week. Although in a few years that may change. It has its days, but most of the time it's a pretty nice gig.

agent_clone

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Re: Reviewed my superannuation - don't need to change!
« Reply #13 on: April 11, 2014, 07:17:49 AM »
Note that preservation age is "currently" 60.  I honestly wouldn't be surprised if the government ups this age which from my point of view would be a mistake (Generally fine for Office workers, but definately not ok for labourers).  Someone on the radio was saying if they adjust the pension age they should al so adjust the preservation age...  At the age of 30 while I understand that its perhaps tax advantageous to put more money into superannuation I don't trust the government not to fiddle with it over the next 30 years to the detriment of Australians.  As such I make my assumptions on monetary requirements by ignoring superannuation and would regard it as a bonus.

Really one of the things they need to do in regards to superannuation is to make it so that you can't take the whole thing out in a lump sum so that it will actually be used as intended rather than to upgrade the house your living in or pay off the mortgage so that you are then eligible for the pension.  A better system for the government to implement would be that when the person retires it then goes into an allocated pension.

I do think that superannuation is a good idea, particularly for those who can't save for themselves but it does need adjustments and whether the government makes those adjustments properly is an entirely different matter.  In regards to pensions I would get the government to include all income (both taxable and tax free) to judge the persons eligibility for the pension.

deborah

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Re: Reviewed my superannuation - don't need to change!
« Reply #14 on: April 11, 2014, 10:29:34 AM »
Note that preservation age is "currently" 60.  I honestly wouldn't be surprised if the government ups this age which from my point of view would be a mistake (Generally fine for Office workers, but definately not ok for labourers). 

It's a problem for everyone - office workers included. Nurses get bad backs, dentists loose their fine motor skills... But the biggest problem is the workforce ageism - particularly for older women. This has been highlighted by the discrimination office (or whatever they are called - Elizabeth Broderick), and is very real. I missed out on two jobs that I was more qualified for than the recipient before I retired. In the public service, all the current retrenchments are targeting older workers... Agreed that the older the worker the more likely to be less enthusiastic, but part of this could be the continual frustrations. And part of my problem of deciding when to retire in my 50s is that even though I am very skilled, I was unlikely to get another job.

My neighbour was a blue collar worker. At the beginning of this year he was forced to retire at 75 because the company couldn't get insurance coverage. He has been wandering around his house like a lost sheep ever since. We try to help.

Melody

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Re: Reviewed my superannuation - don't need to change!
« Reply #15 on: April 15, 2014, 05:29:09 PM »
In my field I see some older workers struggle due to lack of computing skills (especially Microsoft excel). They have the basics, but don't immerse themselves in it and as a result their productivity is low - I think it's easier for younger people who have been using computers their whole lives. I took over my latest job from someone with 15 years experience in Australia and home country experience before that. I'm constantly amazed how manual her spreadsheets are, and have been automating them one by one. I'm hoping when I finish the project I'll be able to put the job on autopilot and focus on getting onto projects that interest me and get me ready for my next promotion. (That being said there are heaps of older workers at my work who either kick my ass in IT skills or may not have fantastic IT kills but have great industry knowledge, managerial skills etc... It seems for the lower less skilled jobs strong IT skills are non negotiable and the only way to be good enough at your job to get promoted out of it.)

marty998

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Re: Reviewed my superannuation - don't need to change!
« Reply #16 on: April 16, 2014, 03:10:54 AM »
Note that preservation age is "currently" 60.

Actually through a SMSF you can start a TRAP (transition to retirement allocated pension) and you can get your super at 55. You don't get it fully tax free though.

Public service schemes are different beast with their own byzantine rules. Most are 60, but some give you bonuses for staying to 70. However you could theoretically create the same bonus by taking your lump sum at 60 and investing it for 10 years in an index fund.


Really one of the things they need to do in regards to superannuation is to make it so that you can't take the whole thing out in a lump sum so that it will actually be used as intended rather than to upgrade the house your living in or pay off the mortgage so that you are then eligible for the pension.  A better system for the government to implement would be that when the person retires it then goes into an allocated pension.


Stand for parliament. I'll vote for that.


Quote
The Liberals created the problem when Costello abloished tax on pension earnings, and Labor spent 6 years making it progressively worse. Entire system needs a rethink because right now all the tax concessions go to the wealthiest, and low income earners actually get taxed more in super than outside.

I thought Labor progressively trimmed it (so from an economic view made it better), although it was a real pain never knowing how much you would be able to put in next year! Agree that the entire system needs a rethink. Many people seem to put money in to super and take it out the same year, and end up with a big splurge, so they can get the full aged pension.


Yes agree Labor *tried* to make it fairer by introducing a refund of contributions tax for low income earners. But then they blew it with the idiotic tax on pension fund earnings over $100k. Good idea but wholly impracticable. IMO the policy should be to reintroduce tax on all pension fund earnings within super, but keep the withdrawals/pensions tax free.