SUPERANNUATION - TIPS & TRAPS
PART ONE

It is no secret that Governments over recent years have been encouraging people to save for their retirement via Superannuation.  To help entice us to save via Superannuation, there are ‘carrots’ such as the Government Co-contribution and tax concessions on superannuation investment earnings.

WHY HAVE MONEY INVESTED IN SUPERANNUATION?

One of the genuine advantages of holding investments via the superannuation platform is the concessional tax treatment given to superannuation contributions, which also apply to investment earnings.

Certain types of contributions may allow individuals to lower their taxable income position (and ultimately save some tax).

Investment earnings are taxed at a maximum of (only) 15%.  In many circumstances, this tax rate will be an improvement on the marginal tax rate that would apply if a person's investments were held outside of superannuation.

Capital Gains Tax (CGT) only applies to two-thirds of realised gains, and is taxed the Super earning rate of 15%. So in practice, CGT is levied at a maximum rate of only 10%. For individuals, realised gains are taxed at the individual's marginal tax rate on 50% of the realised gain (when the asset has been held for 12 months or longer). This means that at a top marginal rate, you are still paying CGT of 22.5%, compared to 10% in Super.

GETTING MONEY INTO SUPERANNUATION

Contribution Eligibility Rules - The following table summarizes eligibility for personal superannuation contributions, or superannuation contributions made on someone's behalf:

Member Age (at time of Contribution)	Personal Contribution (Contribution made personally by member)	Contribution by someone other than member or employer (eg: Spouse, Government Co-Contribution)	Voluntary employer contribution (eg: Salary Sacrifice, no SG Employer contributions)	Manated Employer Contribution (9% SG, Industrial Award Contribution)
Under 65 (includes children)	Yes	Yes	Yes	Yes
65 to 69	Must meet work test	Must meet work test	Must Meet Work Test	Yest
70 to 74	Must meet work test	No	Must meet work test	Yes
75 and over	No	No	No	No
Tax definitition of contribution	May be Concessional or Non-concessional	Generally Non-concessional	Concessional	Concessional
Work test: A member meets the Work test if they have been ‘Gainfully employed’ for at least 40 hours in a period of not more than 30 consecutive days in the financial year of the contribution.  Test must be met prior to contribution being made. Gainfully employed: is employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.  The gain or reward must be tangible (e.g. salary, wages, business income, commissions, etc) and charity work is not generally considered gainful employment.

CONTRIBUTION CAPS

• Concessional contributions are before tax contributions paid by employers (including superannuation guarantee. Self-employed contributions [tax deductible] and salary sacrifice contributions).  A 15% contributions tax will apply to concessional contributions.

Contribution Caps Summary Table
Contribution Cap	Age of Member
Concessional Cap for 2008/2009	Under age 50 on 30/06/09: Cap = $50,000	Age 50 or over on 30/06/09: Cap = $100,000*
Non-concessional Cap for 2008/2009	Under age 65 at any time during 2008/2009: Cap = $150,000 OR Up to $450,000 over a three year period under the 'bring forward provision'	Age 65 or over for all of 2008/2009: Cap = $150,000. No bring forward provision allowed
* Transitional concessional cap - age 50 or over: There is a transition period which applied between 1 July 2007 and 30 June 2012. If a person is 50 years of age or over on the last day of a financial year (within the transition period) the concessioal contribution cap for that year is $100,000. This cap will not be indexed. After 30 June 2012, the cap of $50,000 (this cap will be indexed on an annual basis) will apply to all people regardless of age.
Bring forward provison: People under age 65 at any time in the financial year may effectively bring forward two years worth of non-concessional contributions, allowing them to contribute up to $450,000 (2008/2009 limit) in single financial year. In such circumstances, the person will not be able to contribute to Super again for the following two years.

THE BRING FORWARD PROVISION:

Exceeding the caps:

The penalties for exeeding the contribution caps are quite substantial.

• Excess concessional contributions are taxed at 31.5%, which is in addition to the 15% contributions tax, and are also counted towards the non-concessional cap.  If as a result of this, the excess concessional cap also exceeds the non-concessional cap, it gets taxed again at 46.5%.  As such, the contribution is taxed at 93% in total!!!

• Excess non-concessional contributions are taxed at 46.5%.

Tip : Don’t exceed the caps!

Tax File Number for Supperannuation Accounts:

Where no TFN has been supplied for a member’s superannuation account, concessional contributions and contributions counting towards the assessable income of the fund will be subject to 31.5% no-TFN contributions tax.  This is in addition to any other tax paid on the contribution.

Tip : Supply your Super fund with your TFN !

SUMMARY

We’ve looked at the rules that apply to when and how you can get funds into superannuation, as well as contribution limit restrictions.  These show that although careful planning is required, most people will be able to contribute or receive contributions to superannuation quite easily. 

However, other key areas that may influence people to steer clear of superannuation include superannuation performance and preservation rules.  We will discuss those topics in the next edition of Cornucopia. To Be Continued... Make an appointment with your Hudson Financial Adviser if you wish to discuss these or any other related manners further.

CENTRELINK AGE PENSION

The base rates of pension have increased and are now as follows:

Single:             $562.10 per fortnight
Couple:            $469.50 per fortnight (each)

The thresholds for the Assets and Income Tests have remained unchanged:

Assets Test
Family Situation	For Full Pension - up to	For part-pension - less than
Single Homeowner	$171,750*	$550,500
Couple Homeowner	$243,500*	$873,500
Single Non-Homeowner	$296,250*	$675,000
Couple Non-Homeowner	$368,000*	$998,000
*Assets over these amounts reduce pension by $1.50 per fortnight for every $1,000 above the threshold (single and couple combined)

Income Test
Family Situation	For Full Pension - up to	For part pension - less than
Single	$138 per fortnight	$1,557.75 per fortnight
Couple	$240 per fortnight	$2,602.00 per fortnight

Income over these amounts reduce the rate of pension payable by 40 cents in the dollar (single), 20 cents in the dollar each (for couples).

ONE OFF TAX-FREE PENSIONER PAYMENTTS

All Centrelink Pensioners, Carers and Veterans will recieved a tax-free one-off payment as a result of the Govenment's acion plan to help stimulate Australia's economy and help protect Australia from a possible global recession.

The payments will be made in December with single pensioners, carers and veterans recieving $1400, while couples will recieve a payment of $2100.

The action plan also included payments for families and increases to the first home owners grant.

It is estimated that the planned actions will put an estimated $9.65 billion into the economby by the end of 2008.

What is Retirement?

In talking to many Hudson members approaching or already in retirement, I’ve come to learn that the word "retirement" means many different things to different people.  In fact, many do not like this period of their life being referred to as "retirement" at all. I can understand this, particularly after reading various dictionary definitions for ‘retirement’. On the Internet, www.dictionary.com defines retirement as:
removal or withdrawal from service, office, or business; withdrawal into privacy or seclusion My trusty dictionary at home (the little Macquarie Dictionary, with a cover and pages) defines retirement as: to withdraw or go away to a place of abode, shelter, or seclusion. No wonder many of you don’t like the word ‘retirement’!!!  Most definitions makes it sound quite lonely and depressing, when in fact, this phase in our lives should be an enjoyable and even exciting period.  A time in which we get to travel, take up new activities and interests, enjoy time with grandkids (and then give them back to the parents), spend time with friends, and generally enjoy a time of leisure.
Some retirees (my apologies for use of this word) even see this phase as a period during which they can rebel, rediscover or totally reinvent themselves.  Therefore, it appears that this cycle in our lives is all about a new beginning, not about something ending, as all the definitions seem to indicate. As such, perhaps my own job should be described as “New Life Planning” rather than “Retirement Planning”.  A suggestion from one of my colleagues, Hudson Insurance Adviser Peter Dale, was ‘Halcyon Days’.  I admit that I then referred back to my trusty dictionary to check the meaning of ‘Halcyon’.  The Little Macquarie Dictionary defined it as: calm, tranquil, peaceful, carefree, joyous, wealthy, prosperous. What do you think?  Do you have a great name and/or definition for this new phase of your live?  If so, please let us know.  I'll take a look at some of the suggestions in the next edition of Cornucopia.

Email your suggestions to : srake@hudson-insitute.com

In the ‘New Life’ years, many of our members undertake their dream trips and travel across the entire country at their own leisure.  Thanks to my occupation, I get to hear a lot of stories, and get quite a few travel tips along the way.  Here are a few of my favourites…

Travel between destinations can sometimes mean many hours being miles from anywhere.  One common situation to arise is the need for a toilet stop when you don’t know where the nearest one is…this can be quite uncomfortable and distressing.  Did you know that an Australian National Toilet Map exists?  This map can help you find toilets - not only close to your route, but also toilets with special features such as wheelchair access. Go to http://www.toiletmap.gov.au/
Keep a journal.  A journal is a great way to help you remember your favourite as well as least favourite locations and record the key moments of your trip.  It also helps you document your photos when you get home and record the name and contact details of the people you meet along the way. Its great to make new friends, but even better when you can stay in touch, even when far away!
For single travelers, consider basing your travel on interests and activities you enjoy.  You will be so busy enjoying the things you love that you won’t have time to be lonely.  This way you are more likely to meet new people with similar interests to your own. When considering locations and activities in a particular area, don't be afraid to ask the locals, and ask other travellers what they have done and most enjoyed about their trip. Experience is usually the best judge, not the glossy brochure.
Look for discount offers (searching the internet as you plan your trip) and try and visit the popular tourist spots out of school holiday periods.  Not only will it be less crowded, accommodation may also be cheaper.
Its really important to check weather forecasts for the area/s you are planning to visit. Once you know the conditions, you'll find it easier to pack the appropriate clothing.
Many tour operators offer Seniors Discounts, so check if you are eligible.
If you have a Pension Card, you can often enjoy discounted rail travel and take the ‘stress’ of driving out of the trip.

The above are just a handful of the many tips I have heard over the years.  If you have some good travel tips, I’d love to hear about them.

We recommend that you consult with your qualified and licensed Hudson Adviser who will be able to make a recommendation based on your specific circumstance

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As this information is copyright protected, It is not for distribution. Any requests to use information provided for commercial use may be directed to - Rebecca Redding.The Hudson Report Online is published by The Hudson Institute, trading under Mainview Securities Pty Ltd, Australian Financial Services Licence No. 241177.

Souce/s: A guide to Australian Government Payments, 20 September - 31 December, and The Australian Financail Review, 15 October 2008; American Psychological Association (APA):“retirement.” (n.d.). Dictionary.com Unabridged (v 1.1). Retrieved October 15, 2008, from Dictionary.com website: http://dictionary.reference.com/browse/retirement; Chicago Manual of Style (CMS): “retirement.” Dictionary.com. Dictionary.com Unabridged (v 1.1). Random House, Inc. http://dictionary.reference.com/browse/retirement (accessed: October 15, 2008); Modern Language Association (MLA): "retirement." Dictionary.com Unabridged (v 1.1). Random House, Inc. 15 Oct. 2008. <Dictionary.com http://dictionary.reference.com/browse/retirement>;The Little Macquarie Dictionary- reprint 1996:“retirement”, “halcyon”

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