Maximising your Superannuation contributions

Megan owns a large property on Mt Macedon and is considering downsizing to a smaller property. By downsizing she will have excess cash and is considering contributing to her Superannuation Fund. Megan is employed on a part time basis and earns $65,000 per annum.

If Megan is 64
She can contribute the following:

• Up to $35,000 as a concessional contribution i.e. before tax as a salary sacrifice (this cap includes any Super Guarantee contributions)
• Up to $180,000 non-concessional contribution i.e. after tax. As she is under 65 Megan can access the three year bring forward rule. The bring forward rule allows you to contribute three years of non-concessional contributions in one year i.e. $540,000. However if she contributes the $540,000 she is unable to make non-concessional contributions for the next two years.

If Megan is 65
She can contribute the following provided she meets the work test:

• Up to $35,000 as a concessional contribution (as above)
• Up to $180,000 non-concessional contribution.

In order to meet the work test she must work 40 hours in a 30 day period during that year.

Note: For those aged 49 or younger on 1 July 2014 the concessional contribution limit is $30,000 per annum.

If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.

We service clients in Woodend, Gisborne and Macedon Ranges areas within Victoria Australia.

Are you an Investor or Share Trader?

As recent share market conditions have improved many people are looking to invest available funds in shares.

Consider Mary:

Mary works part-time in a financial planner’s office and has a keen interest in the share market. Mary has $150,000 to invest and is considering the different tax implications if she is classified as a share trader or a share investor.

As a share trader profits are treated as ordinary income and taxed at marginal tax rates. Losses may be applied to other income to reduce overall taxable income. An example would be if Mary trades using trading techniques, undertaking market research for each potential purchase and does so on a regular basis, she may be taxed as a share trader.

As a share investor, gains and losses are treated as capital, provided shares are held for 12 months or more a 50% capital gains tax discount will apply. Capital losses can only be applied against capital gains income, with any excess able to be carried forward. An example would be if Mary buy parcels of shares predominantly for capital growth and/or dividend income.

There is no one hard and fast rule as to which classification Mary will be. It is assessed on a case by
case basis.

If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.

We service clients in the Woodend and Macedon Ranges region within Victoria Australia.

Considering Divorce? Consider this…

As confirmed by recent taxation pronouncements, money or other assets transferred out of a company as part of a divorce settlement are treated as a dividend and will have tax consequences to the recipient.

Case Study

Jack and Jill are divorcing and run a company worth $2 million. This is their only matrimonial asset. Jack is the sole director and shareholder. The Family Court Order requires Jill to be paid $1 million from the company.

The company raises $1 million in cash through borrowing and pays it to Jill. Jack retains control of
the company as part of the settlement.

Jill is deemed to have received a dividend of $1 million and tax is payable at marginal rates. Franking credits may be attached at the discretion of the director.

Had the settlement been by way of transferring property to Jill this would still represent a dividend to Jill. There would also be Capital Gains Tax (CGT) consequences.

This is one of the many financial issues to consider during a divorce. Be sure you get appropriate advice when considering any settlement.

If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.

We service clients in the Woodend and Macedon Ranges region within Victoria Australia.

Are you looking to retire before the age of 60?

Retirement benefits from superannuation should be accessed in the most tax effective manner.

Consider Lyn’s case:

Lyn, aged 57, is retiring. Lyn requires $80,000 (pre-tax) per annum to maintain her lifestyle. Her current superannuation balance of $1,000,000 comprises 50% taxable component
and 50% tax free component.

Transitional Pension

Lyn may commence a transitional pension up until the age of 60 and withdraw the required $80,000 per annum. The taxable component of $40,000 would be taxed at her marginal tax rates with a 15% tax offset.

Lump Sum Withdrawal

Alternatively, Lyn may elect to withdraw $80,000 per year up until age of 60 as a lump sum. Lyn has a taxable lump sum low rate lifetime limit of $185,000. As 50% of Lyn’s balance is tax free, her taxable lifetime limit would reduce by $40,000 p.a.

The tax effective option for Lyn would be lump sum withdrawal as it is entirely tax free.*

If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.

We service clients in the Woodend and Macedon Ranges region within Victoria Australia.

*This is a taxation perspective only, financial advice should be sought prior to accessing
superannuation.