End of Year Strategies and Opportunities

Speaker’s name Title/departmentMonth, 2014

Agenda

Super – it’s still super! Transitioning to retirement Other opportunities Next steps

4

Choose your tax rate!

Individual45%

• Up to 45% - Top marginal rate + 1.5% Medicare levy• Discount of 50% on capital gains

Company

30%

• 30% Company tax rate• No CGT discount

Super15%

• 15% on earnings and deductible contributions • 10% on capital gains

Pension0%

• Tax free earnings within super when drawing a pension• Tax free pension payments once you turn age 60• 15% tax offset on taxable pension payments if over 55 and

under 60

5

Super is a tax structure, not an asset class

• No greater investment risk when investing through super– you can invest in

same assets– cash is an option

• Bankruptcy protection• Low tax environment

SUPERCash

Insurance

Shares

Property Fixed Interest

6

Concessional Caps Increased

Estimate only indexation expected from 1 July 2014 * Those aged 59 on 30 June 2013 also eligible for $35,000 (2013/14) Those aged 49 on 30 June 2013 also eligible for $35,000 (2014/15)

Concessional Cap 2012-13 2013-14 2014-15

Under age 50 $25,000 $25,000 $30,000

Aged 50 - 59 $25,000 $25,000 $35,000*Aged 60 + $25,000 $35,000* $35,000*

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Salary Sacrifice 2013/14

IncomeSuperannuation Guarantee

Maximum salary

sacrifice For those Aged 60+

$100,000 $9,250 $15,750 $25,750

$125,000 $11,562 $13,348 $23,438

$150,000 $13,875 $11,125 $21,125

$180,000 $16,650 $8,350 $18,350

$200,000 $17,775 (maximum) $7,225 $17,225

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Managing Contribution CapsNon-concessional – No Deduction Claimed• Personal contributions capped at $150,000 pa• If under 65 you can bring forward 2 years of cap and

contribute up to $450,000

$150,000

$180,000 $180,000 $180,000

30 June 2013

30 June 2014

30 June 2015

30 June 2016

$450,000 $0 $0 $540,000 $0

30 June 2017

$180,000

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Don’t forget super for a low income spouse

Co-contribution• Govt. Co-contribution up to maximum of $500• To achieve maximum a non-concessional contribution of

$1,000 is required• Income up to $33,516 for full benefit or up to $48,516 for

partial

Spouse contribution tax offset• Tax offset up to $540 for contribution of $3,000• Spouse income up to $10,800 for full or $13,800 for partial

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Insure pre-tax with super

• Save up to 87% on pre-tax cost of funding Life and TPD premiums

• Improve cash flow• Can hold through your SMSF

Pre-tax contributions Super Life & TPD

Insurance

Taxable income over

Marginal tax rate

(inc. Medicare levy)

Pre-tax costoutside super

Pre tax costin Super

Percentage saving

$37,000 34.0% $1,515 $1,000 52%

$80,000 38.5% $1,626 $1,000 63%

$180,000 46.5% $1,869 $1,000 87%

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Double the deduction on income protection

• Income protection deductible personally– Salary sacrifice – “otherwise deductible”– Prepay 12 months in advance

• Double up - Deductible contributions to super up to cap plus personal deduction on income protection premium

• Inside super – cash flow

Incomeprotection

Personally deductible

Pre-tax contributio

nsSuper

Maximise contributio

n cap

Transition to retirement

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Transitioning to retirement

• If you’re 55+ you may be able to:– Reduce your working hours – Use super to supplement your incomeOR

• Maintain fulltime work• Salary sacrifice to super• Draw tax effective income from super

14

Transitioning: Let’s take Ian, for example

• Ian would like to boost his super without affecting his lifestyle • Salary $100,000 p.a.• Receiving $9,250 superannuation guarantee• Age 60

Ian Super

$25,750 salary

sacrifice$9,840 income

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Ian’s super accumulates much quicker

Plus, benefit of 0% tax on earnings when in pension phase

Gross salaryLess tax

$100,000$ 26,447

Net salary $ 73,553

Gross Salary (after SS) $74,250

Net salary $57,459Pension income (age 60 – tax free) $16,094

Net income $73,553

Benefit in Year 1 $5,794

Current Proposed

Includes Medicare levy

Other opportunities

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Terry and Vicki

• Both age 50 and happily married• Vicki’s an employee earning $200,000 p.a.

– maxed out concessional contribution cap• Terry no longer works due to poor health• They have recently sold an investment property

– Proceeds of $400,000– Outstanding loan - $100,000– Initially purchased 3 years ago for $300,000

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They seek advice

• Repay property loan of $100,000• Put $100,000 into a margin loan in Vicki’s name

– Conservative portfolio of investments– 50% LVR – borrow $100,000– Prepay interest – assume rate of 10%

• Surplus of $200,000 in term deposit (Terry’s name)• Vicki donates $2,000 to Cancer Council • Prepay premium of $3,000 on income protection

The result...

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Vicki TerryGain ($100,000 split between two) $50,000 $50,000Assessable gain (after applying discount) $25,000 $25,000Prepay interest on margin loan ($10,000) -Prepay income protection premium ($3,000) -Donation ($2,000) -Assessable amount $10,000 $25,000

Tax payable at marginal rate $4,650 $1,222

Vicki’s assessable amount for this capital gain is $10,000 as opposed to $25,000 if the strategy was not in place.

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Recycle your debt using home gearing

• Borrow against equity in own home to invest in a growth portfolio– Shares– Property– Managed fund

• Income from portfolio used to pay non-deductible debt first

How debt recycling works...

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Income

Property

Managed

funds

Shares

FamilyHome

Home loan(not deductible)

Investment loan

(deductible)Interest

only

Principal & Interest

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Prepayments

• Prepay interest (simplified tax system)– Margin loans – Investment property loans– Equity access

• Prepay other deductible expenses– Income protection insurance– Donations

• Variation of tax– Section 15-15 notice

Next steps

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Next Steps

• Choose what tax rate you want to pay• Start salary sacrificing early• Reassess your insurance needs• Have a disciplined approach• Seek good quality advice

QUESTIONS

Disclaimer

Disclaimer

This information was prepared by Asgard Capital Management Limited ABN 009 279 592, AFSL 240695 (Asgard) and is current as at March 2014. A Financial Services Guide (FSG) is available for all Asgard accounts and services and can be obtained by calling 1800 998 185.  Material contained in this presentation is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.This presentation contains general information only and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. All case studies and examples used in this presentation are for illustrative purposes only and nothing in this presentation should be construed as an indication or prediction of future performance or results.Any taxation position described in this publication should be used as a guide only and is not tax advice. You should consult a registered tax agent for specific tax advice on your circumstances. As the rules associated with the super and pension regimes are complex and subject to change and as the opportunities and effects differ based on your personal circumstances, you should seek personalised advice from a financial adviser before making any financial decision in relation to any matters discussed in this presentation.

“Thanks”