Profile Blog

 

The government’s early super release scheme shows no signs of slowing down, with almost 90,000 release applications received by super funds in the first week of August and more than $700 million in payments made.

 

       

The latest APRA statistics for the week to 9 August revealed that 88,000 applications were received by funds, with 44,000 being first-time applications and 44,000 repeat applications.

There have been 4 million applications since the start of the scheme, with 1.1 million of those being repeat applicants, APRA said.

The scheme has now paid out $31.1 billion, with an average payment size of $7,689.

A total of 139 of the 175 funds in APRA’s reporting scheme have made repeat payments to members, with the average size of repeat payments being $8,487.

The top 10 highest paying funds in the scheme — including AustralianSuper, Sunsuper and REST — have paid out $20.4 billion of total funds released in the scheme.

 

 

Sarah Kendell
18 August 2020
smsfadviser.com

 

 

The rules around Superannuation contribution change almost every year, so it is important that taxpayers know what these changes mean to them.

 

         

The following outlines what has changed.

An increase in the age required for the work test.

From July 1, 2020, the age required rose from 65 to 67. The main benefit of this change is that it provides, where possible, an additional opportunity to implement voluntary super contribution strategies.

What taxable contributions can be made for the year ending June 30, 2021?

There is a cap of $25,000 per person for those able to make extra contributions to their super during the 2020/21 financial year. Any excess over this concessional contribution (CC) cap is taxed at the inpidual’s marginal tax rate.

CCs are contributions where a tax deduction is claimed and include:

  • Superannuation guarantee contributions (SGCs)
  • Employer voluntary / extra contributions like salary sacrificing
  • Member taxable contributions claimed as a deduction in personal ITR.

The CC cap will, in most cases, exceed employer contributions in 2020/21. If this is the case, then consideration could be given to adding personal taxable contributions to get you up to the $25,000 limit.

The higher your income, the greater the tax savings and keep in mind that there is no upper age limit for being eligible to receive SGCs.

Carry forward provisions

An indivdual can carry forward CCs if their total superannuation balance (TSB) is less than $500,000.

Unused contributions can be carried forward for five years. This option came into effect in 2019/20.

An important consideration prior to June 30, 2021 is to see if you can utilise this carry forward option to bolster your CCs before the date noted.

Work test

If an inpidual is under 67, there is no work test required to be able to make a contribution.

The work test is where, once you turn 67, you must be able to show that you have been gainfully employed for 40 hours or more in any 30-day period in a financial year.

If an inpidual is between the ages of 67 to 74, they must meet the work test in order to make a contribution.

Splitting of contributions

An inpidual can split their CCs that are made on their behalf to a spouse but they need to meet certain requirements.

The main reasons to split contributions are to:

  • Assist with the limit of only being allowed to have $1.6 million to start an account-based pension with
  • Assist with ability to make non-concessional contributions (NCC) given the cap limit also of $1.6 million
  • Assist with the ability to use the carry forward provisions given the member balance cap of $500,000
  • Address age differences between spouses and the ability to access benefits at an earlier date
  • Access Centrelink advantages by minimising a member’s account
  • Allow a member to have sufficient superannuation to be able to pay life insurance.

Spouse rebate for super contributions

A spouse rebate, up to a maximum of $540, can be claimed for superannuation contributions for the year ending June 30, 2021.

If your spouse earns less than $37,000 per year and you contribute $3,000 into superannuation for them, you can claim a tax rebate of $540.

Spouse contributions can be made if you are aged under 75 from July 1, 2020.

What tax-free contributions can be made for 2020/21?

Non-concessional contributions (NCC) are those contributions made into a super fund from after tax income. In this case, an inpidual is not claiming a tax deduction. There is a cap for NCCs of $100,000 for the 2020/21 year.

Members under 65 have an option to contribute up to $300,000 over a three-year period, depending on their total superannuation balance (TSB). The rule works as follows:

TSB                        NCC and bring forward amount

< $1.4M                 $300,000 over 3 years

> $1.4 & < $1.5M   $200,000 over 2 years

> $1.5 & < $1.6M   $100,000 over 1 years

> $1.6M                $0 (nil)

To be able to make an NCC, a member must meet the work test, as described above.

The increase from age 65 to 67 also impacts on the ceasing work contribution rule as of July 1, 2020 by given more time to make a NCC.

NCCs can be made on a once-off basis in the financial year after you have ceased employment if your TSB is less than $300,000 as of June 30 in the previous financial year. You also need to be under 75.

Downsizing contributions and how this applies to those over 65 years of age.

From July 1, 2018, anyone 65 years or older can make a downsizer contribution of up to $300,000 from the proceeds of selling their residential home.

The contribution is not an NCC and does not count towards the contribution caps, so it goes into superannuation as a tax-free contribution.

If a member has more than $1.6 million in superannuation, they are still allowed to make a downsizer contribution.

If the downsizer contribution is made and is placed into retirement phase, it will count towards a member’s transfer balance cap, which is $1.6 million.

If you are thinking of downsizing then speaking to a financial planner will help clarify eligibility requirements.

Get more from your super

If you have any questions on the above then simply ask us.

 

 

 

With the ending of a number of the original COVID-19 relief and stimulus initiatives, August and the beginning of September has seen the release of new plans to move into the post-September period. Links to these updates and changes are listed below.

 

     

 

Please click on the following links to access a wide range of Covid-19 related updates, initiatives, guidelines and resources from both Federal and State Governments.

 

Latest Updates:

 

Previous Updates:

 

  • Articles and Updates in other Latest News articles including:
    • Stage 3 – Covid-19 $1.1billion Domestic Violence, Medicare and Mental Health.
    • Stage 2 – Covid-19 – $66 billion stimulus package.
    • Stage 1 – Covid-19 Update – Small Business
    • Stage 1 – PM launches $17.6 billion virus stimulus plan

Several new links have been added to the many already in this article, links that date back to the beginning of the COVID-19 pandemic.  If you have any questions, or require further assistance, please send us an email or phone.

     

Please click on the following links to access a wide range of Covid-19 related guidelines and resources for both Federal and State Government initiatives. Once done, click on the X (top right) to close the article and you’ll return to this list. NB: Internet links are often altered by the source which means some of the following might not link properly. Ongoing testing is done to try and ensure this problem is minimised.

Latest Updates:

Previous Updates

 

 

 

    • Click here for the latest coronavirus news, updates and advice from government agencies across Australia.

 

  • Articles and Updates in other Latest News articles including:
    • Stage 3 – Covid-19 $1.1billion Domestic Violence, Medicare and Mental Health.
    • Stage 2 – Covid-19 – $66 billion stimulus package.
    • Stage 1 – Covid-19 Update – Small Business
    • Stage 1 – PM launches $17.6 billion virus stimulus plan

 

It's a question most of us ask eventually: what happens to our investments when we die?

 

         

The answer often depends on the type of asset you own and the structure through which you own it.

Generally, when you die an executor that you nominate in your will takes control of your assets and has responsibility for distributing them in accordance with your wishes. The executor will normally apply for a court order declaring your will is valid. This court order is called probate.

If you die without a will, or if your executor is unable or unwilling to act, the court will normally appoint an administrator to the estate. The administrator has similar powers to an executor.

Then, they will deal with your assets in accordance with your will, or in accordance with the rules of your state if you didn't leave a will.

Let's look at what happens to your investments one by one:

Real estate

An interest in real estate held in your name alone forms part of your estate and is passed on or sold in accordance with your wishes as set out in your will.

This not necessarily true when you own real estate with someone else.

Jointly owned real estate can be held in one of two ways—as 'joint tenants' or 'tenants in common'. If a tenant in common dies, their interest in the real estate is an asset of their deceased estate and can be passed on to beneficiaries as dictated by their will.1 If they are joint tenants, however, their interest passes directly to the other joint tenant and does not form part of the estate.

Shares and managed funds

Directly-owned shares and units in managed funds that are in your name only form part of your estate and will be passed on in accordance with your will by your executor. The executor can sell shares and distribute the proceeds or distribute the shares directly.

But jointly owned shares come under similar rules to real estate. Where shares are held as 'joint tenants'—which is common in many brokerage accounts—the other owner automatically takes full ownership.

Bank account

If you have a joint bank account, the money will also transfer directly to the other joint holder.2 Otherwise, bank accounts are closed and the money paid to the executor or administrator, who then distributes the money to your beneficiaries.

Personal assets

Your personal property like cars, furniture, clothing, artwork and other goods form part of your estate.3 Most personal property will be distributed according to your will. Property that requires registration, like cars and boats, will need to be formally transferred by the executor.

Family trusts

Assets held in a family trust do not form part of your estate. Assets held in a trust are owned by the trust, which continues to operate after your death.4 The trust determines who gets the assets regardless of what your will says.

Private companies

Similar to family trusts, any assets owned by your private company do not form part of your estate when you die because those assets are owned by the company, not by you personally. This is true even if you are the only shareholder in the company.

The shares that you own in the company do form part of your estate and can be passed on.

Private companies can be complicated if you are the only director and don't leave a will appointing an executor who can appoint a director to the company after you are gone. In that case, a relative would have to apply to the Supreme Court for letters of administration to manage the estate which can take months(5), during which time the company may be unable to trade.

Superannuation

Your superannuation is also not part of your estate as it is held in trust to fund your retirement. Your super is passed to your beneficiaries in very specific ways, usually through a Binding Death Benefit Nomination or a reversionary pension.

The benefit of considering what type of assets will need to be dealt with when you are no longer around may not seem like a big deal but it can make it much easier for those set to receive things you want them to have and for those charged with distributing your assets. So it is well worth while giving the matters covered in our three part series on estate planning serious consideration. 

 

1. https://www.ato.gov.au/General/Capital-gains-tax/Deceased-estates-and-inheritances/Inherited-dwellings/Joint-tenants/
2. https://moneysmart.gov.au/losing-your-partner
3. https://www.lawaccess.nsw.gov.au/Pages/representing/after_someone_dies/distributing_the_estate/transferring_personal_property.aspx
4. https://moneysmart.gov.au/wills-and-powers-of-attorney
5. https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/importance-of-sole-company-directors-or-shareholders-having-a-will/

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
28 July 2020
vanguardinvestments.com.au
 

 

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