Superannuation tricks for a 66-year old

Superannuation tricks for a 66-year old by Lawcentral:




QUESTION: In a few years I will be turning 66 years old.
1. Does your Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... allow me contribute to my Super?
2. Can I contribute the full $450k and then start a pension with the smallest minimum withdrawal rate?
3. My wife has died; can the left over Superannuation when I die go to my adult child tax free?

ANSWER: While the age of 65 is important, under our Self Managed Superannuation Deed http://www.lawcentral.com.au/CreateDo... you can contribute to Super until you turn 75 years of age. This is provided after 65 you satisfy the work test. It is an easy test. All you need to do is work for a total of 40 hours in "gainful" employment within any 30-days of a financial year.

Two doors then open up.

Firstly, you can instruct your boss (or yourself if you are self-employed) to stick in up to $100k into your Super. This is a "concessional tax contribution". This means that you put untaxed earnings directly into your Super and don't personally pay any tax on the income. However, your SMSF will peel off 15% of that contribution and give it to the tax man. Still 15% is better than the highest marginal tax rate of 46.5%.

Your boss also gets a full tax deduction for paying your Super.

If you are going to shovel in more than 9% of your income or your bonuses into Super then you need to document this before you derive the income. This is a common fault with most Employment Contracts. If you use our Employment Contracts http://www.lawcentral.com.au/CreateDo... then you will comply. If you are using someone else's Employment Contract then ask them if their Employment Contract complies.

Secondly, on top of that you can also put in another $150,000 per financial year of "non-concessional contributions". (This is the new term for "after tax-contributions".) This is where the money has already had the tax paid on it. It could, for example, be a nest egg sitting in your bank account or some of the proceeds from the sale of your family home -- assuming your family home is capital gains tax free.

Now, as you were under 65 you could contribute $450k into your Super. You are bringing forward the contribution. Therefore, this stops further "non-concessional contributions" for the next 2 financial years.

Our Self Managed Superannuation Fund Deed http://www.lawcentral.com.au/CreateDo... allows you to immediately start a pension (an account-based pension, to be exact) in which you are only forced to pay 4% of the income to yourself each year. There is now no tax on the income that pensions generate. But while in accumulation mode (before you convert to a pension) your fund is taxed on income. Your deed http://www.lawcentral.com.au/CreateDo... must allow for 2 components: taxable and tax-free component.

Your final question is a tough one. The government has seen fit to tax your adult children at 16.5% on your Super when you die. In fact, apart from your spouse, children under 18 and people you maintain -- all your other family members can get stung with this death duty. There are a number of strategies to reduce this penalty to your "non-dependants" in our deeds. Your adviser and accountant will give you advice on this. You can also consider seeing Brett Davies Lawyers www.taxlawyers.com.au to set up one of our Superannuation Testamentary Trust in your Will.