Along with a raft of legislative change, the Australian Securities and Investments Commission (ASIC) has also introduced new licensing requirements for accountants who work with and advise Self Managed Superannuation Fund (SMSF) Trustees. Only approx. 10% of accountants have complied with these changes to date.
As such if you, as many, consider your accountant would be your 1st port of call for Financial Advice, they will likely advise you, they are unable to provide the information you require & should consult a qualified Financial Adviser / Planner.
This is general advice only and you should seek expert financial advice from a qualified financial adviser before acting on any of the information covered in these topics.
Why Super is ‘Super Dupa’
At any point in time, Superannuation is likely to the most tax effective structure for Australian Investors.
However, after the age of 50 it should be given special attention.
From the age of 65 (and in certain cases age 60), assets held in the superannuation structure may be completely free of tax up to $1.7million, and possibly higher.
Capital Gains Tax (CGT) and tax on income given certain conditions will be zero.
This as opposed to Marginal Tax Rates (MTR) of up to 45%, plus the 2% Medicare levy on individuals earning over $180,000.
For example take an investor aged 50 who is looking at purchasing growth assets (eg shares or property).
Should they look at purchasing these assets via the superannuation tax structure or their individual name s fior example.
All investors should seek expert professional financial planning advice around these decisions.
However, if an individual was to obtain a $250k capital gain on a parcel of shares or property & they are on the top MTR of 45% + Medicare, they would be taxed as follows:
$250k CGT / 2 = $125k. This is then added to the individuals assessable income & taxed at 47% = tax of $58750.
Tax on income, would also be taxed at the individuals MTR along the way.
Should this asset have been held in the pension phase of superannuation available for most from age 60 (definitely from age 65), nil tax would be paid on any capital gain or income earned.
If they have the necessary liquidity & financial circumstances to provide for their needs between the ages of 50 and 65 (and possibly age 60), there could be some significant financial / tax benefits based on this decision.
Investors need to understand, they make their profit at the exit point from an investment, not the entry point, and the amount of tax paid will be a major factor in determining this.
We know what we are, but we know not what we may be – Shakespeare