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Transcript of Financial Considerations for Redundancy - UniSuper/media/files/slide decks... · $18,201 - $37,000...
16/09/2013
1
Financial Considerations for Redundancy
16 September, 2013
Financial Considerations for Redundancy – 16 September, 2013 2
The information contained within this presentation is intended to provide general advice only. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any investment decisions, you should speak with a financial adviser to consider whether this information is appropriate for your needs, objectives and circumstances.
You should obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product.
This information is current as at July 2013 and is based on our understanding of legislation at that date.
Information relating to the 2012/13 & 2013/14 Federal Budgets, and announcements made by the Federal Government on 5 April 2013 is based on our understanding of the proposals. The information provided in this presentation in relation to these announcements is subject to change and certain proposals may not become effective until they are enacted by Parliament. You should not rely on this information and it should be verified prior to making any decision
The information contained in this presentation is not legal, taxation or accounting advice. Professional advice should be obtained before making any decisions. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed.
This presentation was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is also the administrator of, and wholly owned by, the UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Limited (ABN 54 006 027 121) is the trustee of the fund. If you would like to contact us please do so on 1800 331 685 or alternatively send us an email to [email protected]
16/09/2013
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Financial Considerations for Redundancy – 16 September, 2013
Outcomes of this session
3
How your entitlements are taxed
Organise to replace your income
Important decisions to make now
Stay with UniSuper
Sources of further information
Financial Considerations for Redundancy – 16 September, 2013
Your leaving work benefits
4
EmployerEmployer
Pension Lump sum
Pension & lump sum combination
Lump sum
SuperannuationSuperannuation
Redundancy payment
Long service leave
Annual leave
Access depends on your age
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Financial Considerations for Redundancy – 16 September, 2013
Redundancy payment
5
Your entitlements may be based upon a combination of:
Contractual or statutory provisions of employment
Gratuity payments or payments in lieu of notice
Unused RDO’s or sick leave (if applicable)
Financial Considerations for Redundancy – 16 September, 2013
Taxation of Redundancy payment
6
Based on:
The tax components of the payment
Your age
Your length of service
You will receive a quote from your employer showing
the before and after tax payment
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Financial Considerations for Redundancy – 16 September, 2013
Taxation of Redundancy payment
7
Tax free portion of ETP
Taxable portion of ETPUp to ETP cap of $180,000*
Over ETP cap of $180,000*
ETP = Employment Termination Payment
* Based upon 2013/14 rates. No tax free amount if age 65 or over.
Tax free amount*First $9,246 +($4,624 x complete years of service)
0% tax
0% tax
Under age 55
31.5% tax
Over age 55
16.5% tax
46.5% tax
Relates to portion of pre 1/7/1983 service
Financial Considerations for Redundancy – 16 September, 2013
2013/14 tax rates
8
Taxable income Salary sacrifice
0-$18,200 Nil
$18,201 - $37,000 19c for each $1 over $18,200
$37,001 - $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 - $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000
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Financial Considerations for Redundancy – 16 September, 2013
Tax on other payments
9
Type of payment Tax deducted by employer at the lower of
Long Service Leave* Marginal tax rate OR 31.5%
Annual Leave Marginal tax rate OR 31.5%
* If your employer service period pre-dates 16 August 1978, you may pay less tax on the Long Service Leave portion of your payment.
Payments must be taken as cash
Financial Considerations for Redundancy – 16 September, 2013
Example 1
10
Mark
Age: 46
Service: 12 years & 6 months
Redundancy payment: $50,000
Annual Leave:$8,000
Long Service Leave:$26,000
Tax free amount$50,000
Tax on Redundancy payment = $0
Calculate Tax Free Amount $9,246 + ($4,624 x 12) = $64,734
ETP$0
Annual Leave$5,480
Tax on Annual Leave $8,000 x 31.5% = $2,520
Tax on Long Service Leave $26,000 x 31.5% = $8,190
LS Leave$17,810
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Financial Considerations for Redundancy – 16 September, 2013
Example 2
11
Net cash payment = $154,140
Sarah
Age: 58
Service: 15 years & 9 months
Redundancy payment: $110,000
Annual Leave:$18,000
Long Service Leave:$54,000
Tax free amount$78,606
Tax on Redundancy payment $31,394 x 16.5% = $5,180
Calculate Tax Free Amount $9,246 + ($4,624 x 15) = $78,606
ETP$26,214
Annual Leave$12,330
Tax on Annual Leave $18,000 x 31.5% = $5,670
Tax on Long Service Leave $54,000 x 31.5% = $17,010
LS Leave$36,990
Financial Considerations for Redundancy – 16 September, 2013
Example 3
12
Net cash payment = $158,325
Peter
Age: 66
Service: 25 years & 2 months
Redundancy payment: $195,000
Annual Leave:$0
Long Service Leave:$0 Tax free amount
$0
Tax on Redundancy payment $180,000 x 16.5% = $29,700
No Tax Free Amount as over age 65
ETP under cap$150,300
ETP over cap$8,025
Tax on Redundancy payment $15,000 x 46.5% = $6,975
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Financial Considerations for Redundancy – 16 September, 2013
Income options available
13
You may choose to source your ongoing living needs from
Drawing on your Redundancy lump sum
Part time / casual / contract work
Centrelink benefits
Lump sum withdrawals* from super
A pension* commenced with your super
A combination of the above
*Subject to age and work status
Financial Considerations for Redundancy – 16 September, 2013
Age Pension eligibility
14
Men WomenQualification Age Date of birth Qualification Age
65 yearsBefore 1 January 1949 Age reached
1 January 1949 – 30 June 1952 65 years
Note: After 1 July 2017, the qualifying age for an Age Pension will be
increasing progressively from 65 to 67 years of age.
Current arrangements
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Financial Considerations for Redundancy – 16 September, 2013
Potential Centrelink entitlements
15
Age Pension
No waiting period
Must be Age Pension age
Satisfy income and assets test
Single Couple (combined)
Fortnightly income less than $1,773 $2,714
Homeowner’s assets less than $735,750 $1,092,000
Non-homeowner’s assets less
than $878,250 $1,234,500
Full Age Pension
Single $808.40 pf
Couple $1,218.80 pf
Rates as at 1 July 2013
Includes supplement
Financial Considerations for Redundancy – 16 September, 2013
Potential Centrelink entitlements
16
Newstart Allowance
Under Age Pension age
Waiting period based on Redundancy
Undertake Activity Test (job search, volunteer, training)
Satisfy income and assets test
Single Couple (combined)
Fortnightly income less than $935.67 $853.84 each
Homeowner’s assets less than $196,750 $279,000
Non-homeowner’s assets less
than $339,250 $421,500
Full Allowance
Single $505.40 pf
Couple $456.30 pf each
Rates as at 1 July 2013
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Financial Considerations for Redundancy – 16 September, 2013
Accessing super - preservation age
17
Your preservation age is one of the ‘conditions of release’ for
accessing your preserved super as a lump sum or pension.
It is increasing progressively from age 55 to 60 and depends on
your date of birth:
Date of Birth Preservation
Before 1 July 1960 55
July 1960 to June 1961 56
July 1961 to June 1962 57
July 1962 to June 1963 58
July 1963 to June 1964 59
After 30 June 196460
Financial Considerations for Redundancy – 16 September, 2013
Super preservation
18
You may be able to access your super benefits if
Unrestricted Non-Preserved
Restricted Non-Preserved
Preserved
Meet a condition of release
- Reach preservation age & retire;
- Over age 60 & cease an employment arrangement
- Over age 65
You can access these funds at any time
Leave your contributing employer
OR
Meet a condition of release (above)
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Financial Considerations for Redundancy – 16 September, 2013
Tax on lump sum super withdrawals
19
Tax Free Component Taxable Component
Under PA* 0% 21.5%
Between PA* and age 59 0%First $180,000
Over $180,000
0%
16.5%
Over age 60 0% 0%
* PA = Preservation Age.
Financial Considerations for Redundancy – 16 September, 2013
Lump sum withdrawal example
20
Diane is aged 56 and decides to retire after receiving a Redundancy package.
She wants to withdraw $220,000 from her super to repay her mortgage.
Her super has the following components:
• Tax free $50,000
• Taxable $450,000
How much tax will she pay?
For this withdrawal, 10% is tax free ($50,000/$500,000)
Components of $220,000 withdrawal:
Tax free $22,000
Taxable $198,000
Tax on taxable component:
= ($198,000 - $180,000) x 16.5%
= $2,970
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Financial Considerations for Redundancy – 16 September, 2013
UniSuper pensions
21
UniSuper offers three styles of pensions:
Flexi Pension
Commercial Rate Indexed Pension
Defined Benefit Indexed Pension – restricted to
Defined Benefit Division (DBD) members who joined
the Defined Benefit Division prior to 1 July 1998
Financial Considerations for Redundancy – 16 September, 2013
UniSuper Pensions
22
Flexi PensionCommercial Rate Indexed Pension
Defined Benefit Indexed Pension
Investment choice ���� � �
How is your annual pension calculated?
Member nominates pension amount (subject to annual
minimum)#
Fixed CPI indexed pension based on initial sum invested
Fixed CPI indexed pension based on Trust Deed factors
Can you make lump sum withdrawals?
����# � �
How long will the pension last?
Until the account balance is zero
Lifetime (10-year guarantee period)
Lifetime
What benefits are paid when you die?
Remaining account balance paid as either a reversionary pension to spouse or child or
lump sum to beneficiaries
Joint pension paid to surviving spouse, or sum within guarantee period
To surviving spouse only (or
dependent children)
# Restrictions apply when taking a pension under transition to retirement rules
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Financial Considerations for Redundancy – 16 September, 2013
Tax on Pensions
23
Super Pension
Investment earnings 15% 0%
Annual pension income
Under age 60 Age 60 and over
Taxable proportionMarginal tax rate
(less 15% tax offset)0%
Tax-free proportion 0% 0%
Financial Considerations for Redundancy – 16 September, 2013
Tax on pensions
24
Ordinary income Pension income
Other taxable income $50,000 -
Pension income (100% taxable)
- $50,000
Taxable income $50,000 $50,000
less tax* ($7,797) ($7,797)
plus tax offset for pension (15% x $50,000)
- $7,500
Net income after tax $42,203 $49,703
Medicare levy ** ($750) ($750)
* Based on 2013/14 tax rates and does not include any tax offsets which may be available.
** Medicare levy has been included; however, the amount payable can vary between taxpayers depending on their own incomes, their combined family incomes & the number of dependent children (if any).
Compare earnings of $50,000 p.a. as ordinary income versus pension income when under the age of 60
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Financial Considerations for Redundancy – 16 September, 2013
What happens when I leave my employer?
25
1. Your employer will notify UniSuper that you have left
2. Information pack on your UniSuper Benefit and Options
- automatically sent by UniSuper
3. If a Defined Benefit Division member, you have 90 days
from your employment finish date to let UniSuper know
what you would like to do with your benefits
Financial Considerations for Redundancy – 16 September, 2013
• DBD benefit is transferred to an Accumulation 1 account
• Investment choice now important
• DBD benefit is transferred to an Accumulation 1 account
• Investment choice now important
The first 90 days are important
26
Defined Benefit Division (DBD)
members
Defined Benefit Division (DBD)
members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to
age & work status)
3. Open a UniSuper pension (subject to
age & work status)
4. Defer DBD membership
4. Defer DBD membership
1. Get new employment
1. Get new employment
5. Do nothing5. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
16/09/2013
14
Financial Considerations for Redundancy – 16 September, 2013
The first 90 days are important
27
Defined Benefit Division (DBD)
members
Defined Benefit Division (DBD)
members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to
age & work status)
3. Open a UniSuper pension (subject to
age & work status)
4. Defer DBD membership
4. Defer DBD membership
1. Get new employment
1. Get new employment
5. Do nothing5. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
• Withdrawal (lump sum if eligibl)
• Rollover to another fund
• Withdrawal (lump sum if eligibl)
• Rollover to another fund
Financial Considerations for Redundancy – 16 September, 2013
• Defined Benefit Indexed Pension (if eligible)
• Commercial Rate Indexed Pension
• Flexi Pension
• Defined Benefit Indexed Pension (if eligible)
• Commercial Rate Indexed Pension
• Flexi Pension
The first 90 days are important
28
Defined Benefit Division (DBD)
members
Defined Benefit Division (DBD)
members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to
age & work status)
3. Open a UniSuper pension (subject to
age & work status)
4. Defer DBD membership
4. Defer DBD membership
1. Get new employment
1. Get new employment
5. Do nothing5. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
16/09/2013
15
Financial Considerations for Redundancy – 16 September, 2013
• Stay a member of the DBD (benefit growth limited – age factor only)
• Possibly re-activate DBD membership at a later date
• Retain eligibility for DB Indexed Pension
• Stay a member of the DBD (benefit growth limited – age factor only)
• Possibly re-activate DBD membership at a later date
• Retain eligibility for DB Indexed Pension
The first 90 days are important
29
Defined Benefit Division (DBD)
members
Defined Benefit Division (DBD)
members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to
age & work status)
3. Open a UniSuper pension (subject to
age & work status)
4. Defer DBD membership
4. Defer DBD membership
1. Get new employment
1. Get new employment
5. Do nothing5. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
Financial Considerations for Redundancy – 16 September, 2013
• DBD benefit is transferred to an Accumulation 1 account
• Investment choice now important
• DBD benefit is transferred to an Accumulation 1 account
• Investment choice now important
The first 90 days are important
30
Defined Benefit Division (DBD)
members
Defined Benefit Division (DBD)
members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to
age & work status)
3. Open a UniSuper pension (subject to
age & work status)
4. Defer DBD membership
4. Defer DBD membership
1. Get new employment
1. Get new employment
5. Do nothing5. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
16/09/2013
16
Financial Considerations for Redundancy – 16 September, 2013
• Participating employer –Accumulation 2 can continue
• Other employer – choice means you stay with UniSuper (Accumulation 1 account)
• Participating employer –Accumulation 2 can continue
• Other employer – choice means you stay with UniSuper (Accumulation 1 account)
The first 90 days are important
31
Accumulation 2 members
Accumulation 2 members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to age & work status)
3. Open a UniSuper pension (subject to age & work status)
1. Get new employment
1. Get new employment
4. Do nothing4. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
Financial Considerations for Redundancy – 16 September, 2013
• Withdrawal (lump sum if eligible)
• Rollover to another fund
• Withdrawal (lump sum if eligible)
• Rollover to another fund
The first 90 days are important
32
Accumulation 2 members
Accumulation 2 members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to age & work status)
3. Open a UniSuper pension (subject to age & work status)
1. Get new employment
1. Get new employment
4. Do nothing4. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
16/09/2013
17
Financial Considerations for Redundancy – 16 September, 2013
The first 90 days are important
33
• Commercial Rate Indexed Pension
• Flexi Pension
• Commercial Rate Indexed Pension
• Flexi Pension
Accumulation 2 members
Accumulation 2 members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to age & work status)
3. Open a UniSuper pension (subject to age & work status)
1. Get new employment
1. Get new employment
4. Do nothing4. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
Financial Considerations for Redundancy – 16 September, 2013
• Accumulation 2 benefit is transferred into an Accumulation 1 account
• Accumulation 2 benefit is transferred into an Accumulation 1 account
The first 90 days are important
34
Accumulation 2 members
Accumulation 2 members
2. Withdrawal2. Withdrawal
3. Open a UniSuper pension (subject to age & work status)
3. Open a UniSuper pension (subject to age & work status)
1. Get new employment
1. Get new employment
4. Do nothing4. Do nothing
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
All of the options can affect your benefit entitlements and insurance cover. You should seek advice as to your appropriate level of cover.
16/09/2013
18
Financial Considerations for Redundancy – 16 September, 2013
What if I start a new job?
35
In the higher education and research sector
- You can provide your UniSuper membership number for future contributions
Outside the higher education sector
- You have the option to elect UniSuper as your preferred super fund
- If so desired, complete the Choice of Fund forms and provide to your new employer
Financial Considerations for Redundancy – 16 September, 2013
Your UniSuper membership advantages
36
Keep in mind that no matter what your next step is, you can remain a UniSuper member and benefit from:
� competitive fees
� a choice of investment options
� insurance cover (if applicable)
� access to UniSuper’s pension products
� personal advice from UniSuper Advice (at competitive fee for service rates)
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19
Financial Considerations for Redundancy – 16 September, 2013
How UniSuper can help
37
UniSuper offers 3 levels of advice:
General Advice (phone-based)
- Not specific to your personal situation
Limited Advice (phone-based)
- Single issue personal advice specific to your situation
Comprehensive Personal Advice (face to face)
- Full personal advice covering multiple issues specific to your
situation
Financial Considerations for Redundancy – 16 September, 2013
How UniSuper can help
38
A UniSuper Private Client Adviser can help give you
peace of mind
The advice is charged at an hourly rate, with no
commissions paid
There is no charge for the first appointment
Call UniSuper Advice today on 1300 331 685 for a complimentary
initial assessment on the level of advice that might suit you
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20
Financial Considerations for Redundancy – 16 September, 2013
Need more information?
39
Read through your Benefit Options pack and information
UniSuper’s website www.unisuper.com.au
Call the UniSuper Helpline – 1800 331 685
- call UniSuper Advice direct on – 1300 331 685
Talk to your Superannuation Officer
Contact Centrelink’s Financial
Information Service
Financial Considerations for Redundancy – 16 September, 2013
Any questions?
40
16/09/2013
21
Financial Considerations for Redundancy – 16 September, 2013
The Board’s recent decision
The Board has made its decision under Clause 34 of the Trust Deed
Benefits members have accrued to date will not change
The Board has decided to make a change to the way future benefits will accrue
The change will affect Benefit Salary, which is part of the DBD formula
The change will not take effect until 1 January 2015
41
Financial Considerations for Redundancy – 16 September, 2013
What is the change?
42
Current DBD formula
Benefit Salary
Current
Average over three years
Each of the three salaries is indexed by CPI
From 1 January
Average over five years
No longer indexed by CPI
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22
Financial Considerations for Redundancy – 16 September, 2013
Further information . . .
Go to:
www.unisuper.com.au/dbdupdate
43
Financial Considerations for Redundancy – 16 September, 2013
Appendix
Further detail on UniSuper Pensions
44
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23
Financial Considerations for Redundancy – 16 September, 2013
Flexi Pension
account-based pension
minimum commencement sum of $25,000
able to withdraw lump sums (commutation).
45
You decide:
• how it is invested – choice of investment option(s)
• payment frequency (fortnightly, monthly, quarterly, bi-
annually or annually)
• pension amount (subject to minimums).
You decide:
• how it is invested – choice of investment option(s)
• payment frequency (fortnightly, monthly, quarterly, bi-
annually or annually)
• pension amount (subject to minimums).
You decide:
• how it is invested – choice of investment option(s)
• payment frequency (fortnightly, monthly, quarterly, bi-
annually or annually)
• pension amount (subject to minimums).
Financial Considerations for Redundancy – 16 September, 2013
Flexi Pension
The minimum pension is calculated upon commencement and at 1
July each year thereafter.
It’s based on your age and account balance.
46
Age % factor (2013/14)
55 – 64 4%
65 – 74 5%
75 – 79 6%
80 – 84 7%
85 – 89 9%
90 – 94 11%
95+ 14%
Example:
On 1 July 2013, Carol is aged 66 and has
an account balance of $400,000.
Her minimum pension for 2013/14 is
$16,000 (i.e. $400,000 x 4%)
Carol nominates to receive a pension of
$2,200 per month ($26,400 p.a.)
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Financial Considerations for Redundancy – 16 September, 2013
Commercial Rate Indexed Pension
Lifetime pension purchased using super balance (minimum of $25,000)
Monthly pension indexed in line with the Consumer Price Index (CPI) each July
10-year guarantee period
Pension quote is based on interest rate and age factors.
47
You decide:
• between a single or joint life pension
• if joint, reversionary pension of 100%.
You decide:
• between a single or joint life pension
• if joint, reversionary pension of 100%.
You decide:
• between a single or joint life pension
• if joint, reversionary pension of 100%.
Financial Considerations for Redundancy – 16 September, 2013
Defined Benefit Indexed Pension
Restricted to DBD members prior to 1 July 1998
Lifetime pension based on Trust Deed factors
Monthly pension indexed in line with the CPI each July
Spouse reversionary pension of 62.5%
No residual capital to estate (if not survived by a spouse).
48
You decide:
• whether to take part of the pension as a lump sum prior to
commencement.
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25
Financial Considerations for Redundancy – 16 September, 2013
Additional Federal Government Announcements
49
2013/14 Federal Budget
April 2013 Announcements
2012/13 Federal Budget
Financial Considerations for Redundancy – 16 September, 2013
2013/14 Federal Budget Announcement
Pilot Proposal: Housing Help for Senior Australians
Means test exemption for Age Pension recipients downsizing from their
family home
- Home must have been owned for at least 25 years
- At least 80% of sale proceeds (up to $200,000) to be deposited into a
special account
- Funds deposited (plus interest) exempt from means testing for up to
10 years provided no funds withdrawn for life of account
50
16/09/2013
26
Financial Considerations for Redundancy – 16 September, 2013
2013/14 Federal Budget Announcement
Pilot Proposal: Housing Help for Senior Australians
Exemption also applies to people assessed as homeowners who move to
a retirement village or granny flat
- Does not apply to those moving into residential aged care
Pilot will commence on 1 July 2014 and be closed to new customers from
1 July 2017
51
Financial Considerations for Redundancy – 16 September, 2013
Changes to higher concessional contribution cap
Individual’s aged 60 and over to receive a higher concessional
contribution cap from 1 July 2013
- Applies to individual’s age 50 and over from 1 July 2014
Higher cap applies regardless of account balance
52
Financial YearConcessional Contribution Cap
Under age 50 Age 50 to 59 Age 60 and over
2013/14 $25,000 $25,000 $35,000**
2014/15 $30,000* $35,000**
* Likely increase through indexation ** Unindexed
Contributions and caps
16/09/2013
27
Financial Considerations for Redundancy – 16 September, 2013
April 2013 Federal Government Announcement
Proposal: Cap tax exempt earnings for superannuation income
streams
Includes earnings from dividends, interest and some measure of
assessable capital gains
Applies to all superannuation income streams including defined benefit
pensions
53
Income Stream Earnings Current tax treatment
Proposed tax treatment from 1 July 2014
Up to $100,000 p.a. Nil Nil
Over $100,000 p.a. Nil 15%
Exact details of how the tax will work has not yet been finalised
Financial Considerations for Redundancy – 16 September, 2013
April 2013 Federal Government Announcement
Proposal: Cap tax exempt earnings for superannuation income
streams
Application to defined benefit pensions:
- Notional earnings to be calculated each year per defined benefit
pension member
- Calculations to be based on actuarial calculations, and will depend on
the size of the member’s pension and their age
- Amount of notional earnings will reduce as member grows older
Exact details of how the tax will work has not yet been finalised
54
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28
Financial Considerations for Redundancy – 16 September, 2013
New Treatment for Excess Concessional Contributions
Applies to excess concessional contributions from 1 July 2013
Eligible individual’s can withdraw up to 85% of excess concessional
contributions made from 1 July 2013
Special conditions apply to Defined Benefit members
55
Concessional Contributions from 1 July 2013
Tax on Contribution
Up to the CCC 15%
Over the CCC and remaining in superannuation account Amount included in assessable income and
taxed at marginal tax rate plus interest charge payable to the ATOOver CCC but withdrawn from superannuation
account
CCC = Concessional Contribution Cap
Financial Considerations for Redundancy – 16 September, 2013
April 2013 Federal Government Announcement
Proposal: Deeming rules to apply to income from account-
based pensions
For the purposes of calculating Centrelink Pension entitlements under the
Income Test
Applies to all account-based pensions commenced from 1 January 2015
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Account-based Pension Commencement Date
Assessment of pension income under Centrelink’s Income Test
Before 1 January 2015 Annual Pension less deduction amount
1 January 2015 onwards Annual Pension deemed
16/09/2013
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Financial Considerations for Redundancy – 16 September, 2013
April 2013 Federal Government Announcement
Proposal: Deeming rules to apply to income from account-
based pensions
Example: Margaret, aged 65 and single, commences an account based
pension with $500,000 drawing an income stream of $35,000 p.a.
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Account-based Pension Commencement Date
Assessment of pension income under Centrelink’s Income Test
Before 1 January 2015$11,873
($35,000 – ($500,000/21.62))
1 January 2015 onwards$19,319
(45,400 x 2.5%) + ($454,600 x 4%)
Financial Considerations for Redundancy – 16 September, 2013
April 2013 Federal Government Announcement
Other proposals
Further reforms to the arrangements of lost superannuation
Establishment of a Council of Superannuation Custodians
- to ensure future changes are consistent with an agreed Charter of
Superannuation Adequacy and Sustainability
Extending concessional tax treatment to deferred annuities
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16/09/2013
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Financial Considerations for Redundancy – 16 September, 2013
Reduced tax concessions for high income earners
New tax rules apply to individuals with income above $300,000 p.a.
‘Income’ includes concessional contributions to superannuation
Concessional contributions maybe taxed at an extra 15%
- Does not apply to Excess Concessional Contributions subject to
Excess Concessional Contributions Tax
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Financial Considerations for Redundancy – 16 September, 2013
2012/13 Federal Budget Announcement
Employment Termination Payment (ETP) Tax Offset
Changes to the tax offset applied to Employer Termination Payments
for affected ETP’s (e.g. golden handshakes)
- Only the part of the ETP that takes a person’s taxable income
(including the ETP) to $180,000* receives tax offset
- Existing arrangements for ETP’s relating to genuine redundancy,
invalidity, compensation due to an employment related dispute or
death are likely to remain unchanged.
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* For the 2012/13 financial year
16/09/2013
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Financial Considerations for Redundancy – 16 September, 2013
2012/13 Federal Budget Announcement
Mature Age Worker Tax Offset
To be phased out for workers born on or after 1 July 1957
Offset to remain available for tax payers who are aged 55 or older on 30
June 2012.
- Maximum benefit is $500 and you must be receiving income from
working (within certain limits)
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