According to Einstein, compound interest is the eighth wonder of the world, so, if you earn 8% interest on your money it will double every 8 years (a pretty realistic long term average return on super). Try it on a spreadhseet but doing the math backwards lets say I'm 60 and have $2,000,000 (for ease of the math), 8 years ago I would have had a $1,000,000 balance when I was 52, then 8 years before that when I was 44 a $500k balance and at 36 a $250k balance and at 28 a $125k balance. Sounding achievable? It is :)
Am I right to assume that if I were to apply a re-contribution strategy to improve tax free split applied on death, that each time I convert money from the accumulation account this adds to the transfer balance? Example: $1.0m 100% taxable component all move to Pension. $500k re-contributed making 33% of contributions taxable. $500k moved to Pension phase. Have I now used $1.5m of transfer balance? Thank you.
Hi - Yes, starting new pensions does add to the transfer balance account but any lump sum withdrawals that are made from a retirement income stream are subtracted from it - making more space for future pensions. For example, if a pension was started with $1 million and then $300,000 was withdrawn as a lump sum, the transfer balance account would have a value of $700,000 due to the addition of $1 million when the pension was commenced, and subtraction of $300,000 when the lump sum was withdrawn. Any new income streams that are subsequently purchased/started will have their value added to the transfer balance account. We describe how debits from and credits to the transfer balance account operate from 6.20 in this video in the context of transferring money back into the accumulation phase. The same occurs when amounts are withdrawn as a lump sum (commutation), but not when payments are withdrawn as income. It is critical to ensure that instructions to your super fund about any withdrawals from an income stream are clear and specify whether the payment should be treated as income or a commutation (lump sum) due to this different treatment under the transfer balance account.
I know you're probably just trying to keep it simple but my understanding of the TBC when buying a lifetime annuity is it doesn't count the the full amount of the purchase price of the annuity it's 16 x the amount of the annualised 1st payment so if your 1st monthly annuity payment is $5,000 then it's $5,000x12=$60,000 then x16 to equal $960,000 even if the annuity cost you $1.2mil.
Hi - For an annuity that is purchased with superannuation money on or after 1 July 2017, it is the purchase price that is added to the transfer balance account, as we show in the video. The treatment you have described applies to a special category of income streams called capped defined benefits. These include annuities that were purchased prior to 1 July 2017. The only new capped defined benefit income streams that can be created (since 2017) are defined benefit pensions that individuals are entitled to from a super fund they belong to, rather than products that can be purchased. We cover this in more detail in the longer version of this video that is available to members.
Can someone explain to me how our tax system is fair and reasonable? A couple (after 60 years old) can draw down a tax-free income from their allocated pension (valued up to $3.8M), eg. 5% = $190K pa. In addition, each person can earn up to $45K pa in fully franked dividends without paying tax or $90K per couple. In total, this income of AUD$280K pa, per couple, who pay NO income tax. Why are homeless people, unemployed and students paying 10% tax on goods and services (GST)... which is the same rate of tax as rich people?
I’m not on any side on this, but I guess to get that much in super, your hypothetical older couple put a lot of after tax income in super that, given the amounts we are talking about, we’re likely taxed at a high rate. Or they downsized their home. Or both.
What's not fair about it? I'm 55 and have worked since I was 15, paid income tax and also paid 15% tax on my contributions that I've put away in to super so that I have money when I stop working. That's what is unfair. Taxing money into a system designed to help you save for your own retirement and not rely on govt aged pension. I've also paid capital gains tax on an investment property, capital gains tax on shares I've made money on and paid an additional 1 percent more on my medicare levy for many many years because of being a high income earner. There is even add another tax I pay called a 293 assessment tax (another 15% tax for the same reason) look it up. I also studied and had a HECS debt and paid that too. Back to Super......it's fairly responsible I think that I've put my own money away for the future so I don't have to live off the govt pension and so I can l live a lifestyle I have been responsbile for funding. Why shouldn't my own super money be tax free once you reach retirement. I've being paying more than my fair share of tax for 40 years already. Why should I pay a higher rate of GST because I'm retired and have saved all my life? I do feel for the homeless and those with diabilities but life isn't fair at the end of the day. I could have been born in another less fortunate country, had a disability, had long periods of unemployment, had sick faimily but instead I've been lucky to be born in a capitalist country and making the most of it.😃 PS: Fully franked dividends come with tax paid on the entire dividend at the corporate rate of 30%. ie the company that issues them already paid the tax so no further tax payable.
before retirement those high income earners have been paying a fair bit of tax helping the disabled and unemployed. Furthermore there are no aged pension if not qualified. Instead, to save for such high balance there have been choices made how their money were saved for their retirement. If you can't beat them, join them.
@@noelg5783 There you go. I can’t wait to be a ‘self funded’ retiree. I get to use the luck to be born here, the tax structure, free uni (and some of my own hard work) to live well. But the real fun is being self righteous, isn’t it @noelg5783 ?
Simples, I dont drink, smoke or gamble. I worked all my life up to 70 hours a week. I spent less than I earned. Any surplus was invested in shares and property. I followed Warren Buffets doctrine on life. I educated myself, particulalry in the value of money and other things. So I worked my way out of poverty. I grew up one of eight kids after WWII in London. We were poor and the only way was up. I have paid more than my fair share of tax. income tax is not fair as the more you earn the greater % you pay. I get no hand outs, no pension, no rate relief or cheap prescriptions. Every one has the same opportunity in life. Some decide not to work to get ahead, others succeed.
Great - and thanks for the focus on larger balances.
good video, but who the hell has 1.9 Mill in super these days or anything near that.
With a mortgage, raising kids, bills. divorce etc.
According to Einstein, compound interest is the eighth wonder of the world, so, if you earn 8% interest on your money it will double every 8 years (a pretty realistic long term average return on super). Try it on a spreadhseet but doing the math backwards lets say I'm 60 and have $2,000,000 (for ease of the math), 8 years ago I would have had a $1,000,000 balance when I was 52, then 8 years before that when I was 44 a $500k balance and at 36 a $250k balance and at 28 a $125k balance. Sounding achievable? It is :)
It is certainly possible and without doing any risky investment.
Am I right to assume that if I were to apply a re-contribution strategy to improve tax free split applied on death, that each time I convert money from the accumulation account this adds to the transfer balance? Example: $1.0m 100% taxable component all move to Pension. $500k re-contributed making 33% of contributions taxable. $500k moved to Pension phase. Have I now used $1.5m of transfer balance? Thank you.
Hi - Yes, starting new pensions does add to the transfer balance account but any lump sum withdrawals that are made from a retirement income stream are subtracted from it - making more space for future pensions.
For example, if a pension was started with $1 million and then $300,000 was withdrawn as a lump sum, the transfer balance account would have a value of $700,000 due to the addition of $1 million when the pension was commenced, and subtraction of $300,000 when the lump sum was withdrawn. Any new income streams that are subsequently purchased/started will have their value added to the transfer balance account.
We describe how debits from and credits to the transfer balance account operate from 6.20 in this video in the context of transferring money back into the accumulation phase. The same occurs when amounts are withdrawn as a lump sum (commutation), but not when payments are withdrawn as income. It is critical to ensure that instructions to your super fund about any withdrawals from an income stream are clear and specify whether the payment should be treated as income or a commutation (lump sum) due to this different treatment under the transfer balance account.
@ fabulous explanation, thank you!
I know you're probably just trying to keep it simple but my understanding of the TBC when buying a lifetime annuity is it doesn't count the the full amount of the purchase price of the annuity it's 16 x the amount of the annualised 1st payment so if your 1st monthly annuity payment is $5,000 then it's $5,000x12=$60,000 then x16 to equal $960,000 even if the annuity cost you $1.2mil.
Hi - For an annuity that is purchased with superannuation money on or after 1 July 2017, it is the purchase price that is added to the transfer balance account, as we show in the video.
The treatment you have described applies to a special category of income streams called capped defined benefits. These include annuities that were purchased prior to 1 July 2017.
The only new capped defined benefit income streams that can be created (since 2017) are defined benefit pensions that individuals are entitled to from a super fund they belong to, rather than products that can be purchased. We cover this in more detail in the longer version of this video that is available to members.
@@SuperGuideAustralia Great, wasn't aware of that, thanks for the explanation.
Sharry already everyone knows 😊
Can someone explain to me how our tax system is fair and reasonable? A couple (after 60 years old) can draw down a tax-free income from their allocated pension (valued up to $3.8M), eg. 5% = $190K pa. In addition, each person can earn up to $45K pa in fully franked dividends without paying tax or $90K per couple. In total, this income of AUD$280K pa, per couple, who pay NO income tax. Why are homeless people, unemployed and students paying 10% tax on goods and services (GST)... which is the same rate of tax as rich people?
I’m not on any side on this, but I guess to get that much in super, your hypothetical older couple put a lot of after tax income in super that, given the amounts we are talking about, we’re likely taxed at a high rate. Or they downsized their home. Or both.
What's not fair about it? I'm 55 and have worked since I was 15, paid income tax and also paid 15% tax on my contributions that I've put away in to super so that I have money when I stop working. That's what is unfair. Taxing money into a system designed to help you save for your own retirement and not rely on govt aged pension. I've also paid capital gains tax on an investment property, capital gains tax on shares I've made money on and paid an additional 1 percent more on my medicare levy for many many years because of being a high income earner. There is even add another tax I pay called a 293 assessment tax (another 15% tax for the same reason) look it up. I also studied and had a HECS debt and paid that too. Back to Super......it's fairly responsible I think that I've put my own money away for the future so I don't have to live off the govt pension and so I can l live a lifestyle I have been responsbile for funding. Why shouldn't my own super money be tax free once you reach retirement. I've being paying more than my fair share of tax for 40 years already. Why should I pay a higher rate of GST because I'm retired and have saved all my life? I do feel for the homeless and those with diabilities but life isn't fair at the end of the day. I could have been born in another less fortunate country, had a disability, had long periods of unemployment, had sick faimily but instead I've been lucky to be born in a capitalist country and making the most of it.😃 PS: Fully franked dividends come with tax paid on the entire dividend at the corporate rate of 30%. ie the company that issues them already paid the tax so no further tax payable.
before retirement those high income earners have been paying a fair bit of tax helping the disabled and unemployed. Furthermore there are no aged pension if not qualified. Instead, to save for such high balance there have been choices made how their money were saved for their retirement. If you can't beat them, join them.
@@noelg5783 There you go. I can’t wait to be a ‘self funded’ retiree. I get to use the luck to be born here, the tax structure, free uni (and some of my own hard work) to live well. But the real fun is being self righteous, isn’t it @noelg5783 ?
Simples, I dont drink, smoke or gamble. I worked all my life up to 70 hours a week. I spent less than I earned. Any surplus was invested in shares and property. I followed Warren Buffets doctrine on life. I educated myself, particulalry in the value of money and other things. So I worked my way out of poverty. I grew up one of eight kids after WWII in London. We were poor and the only way was up.
I have paid more than my fair share of tax. income tax is not fair as the more you earn the greater % you pay. I get no hand outs, no pension, no rate relief or cheap prescriptions.
Every one has the same opportunity in life. Some decide not to work to get ahead, others succeed.