Financial Tools
  Client Portfolio Access
  New Client Kit
  Enquiry / Seminar Registration
Hot Issues
Aussie economy shifts gears as structural changes take hold
The catch 22 of retirement savings
Are there reasons to help the tax man do his job?
Some financial terms explained
Small business paradox
Good financial planning finally has a value: 23% more income in retirement
Market Update - January 2015
‘Incredibly high’ number of trustees hold no life insurance
SMSFs in 2015 Budget’s firing line
Rebalancing resolutions
Hammering away at asset allocation is only part of the retirement income solution
Market Update – December 2014
We wish all our clients a Merry Christmas,a Happy New Year and a restful holiday
A great overview of investing and good Holiday reading.
The final nail in the coffin for LRBAs?
Market Update – November 2014
Online financial tools your family and friends can use.
Overcoming our behavioural barriers to saving
Articles archive
Quarter 4 October - December 2014
Quarter 3 July - September 2014
Quarter 2 April - June 2014
Quarter 1 January - March 2014
Quarter 4 October - December 2013
Quarter 3 July - September 2013
Quarter 2 April - June 2013
Quarter 1 January - March 2013
Quarter 4 October - December 2012
Quarter 3 July - September 2012
Quarter 2 April - June 2012
Quarter 1 January - March 2012
Quarter 4 October - December 2011
Quarter 3 July - September 2011
Quarter 2 April - June 2011
Quarter 1 January - March 2011
Quarter 4 October - December 2010
Quarter 3 July - September 2010
Quarter 2 April - June 2010
Quarter 1 January - March 2010
Quarter 4 October - December 2009
Quarter 3 July - September 2009
Quarter 2 April - June 2009
Quarter 1 January - March 2009
Quarter 4 October - December 2008
Quarter 3 July - September 2008
Quarter 2 April - June 2008
Quarter 1 January - March 2008
Quarter 4 October - December 2007
Quarter 3 July - September 2007
Quarter 2 April - June 2007
Quarter 1 January - March 2007
Quarter 4 October - December 2006
Quarter 3 July - September 2006
Quarter 2 April - June 2006
Quarter 2 of 2006
Simple super tax appeal
Do Nothing Option A Super Risk
Self Managed Superannuation Fund Update.
Stress test your portfolio before market does
Market Notes - May 2006
Market Update - General - May 2006.
Investment Markets Data - Update to 31 May 06.
A dynamic duo of tax cuts and super
Super Guarantee Contribution Penalties
Splitting Super Contributions
Superannuation highlights from the Federal Budget 2006
Market Notes - April 2006
Market Update - General - April 2006
Investment Markets Data - Update to end April 06.
Simple super tax appeal

For people who have left their tax planning to the last minute this financial year there may be a simple super solution.

The dramatic overhaul of the super tax laws by Federal Treasurer Peter Costello in the May budget means everyone contributing to super - and looking for a tax-advantaged investment - should be reviewing their arrangements and contribution strategies.

For people planning to contribute significant after-tax or undeducted contributions into super in the near future the news that the tax on benefits had been abolished from July next year was bitter sweet.

Abolishing the tax is a masterstroke in terms of simplifying the system. But the benefit is not that great if your super account balance is low - perhaps because you were concerned about locking up substantial assets too far out from retirement.

So the challenge has suddenly changed: how to get as much money in under the super tax shelter. By capping the after-tax contribution level immediately at $150,000 a year the Government has significantly restricted people's ability to get money into the super system by way of post-tax lump sums. The restriction is for good reason because the amount of money that would have moved into super otherwise would have been dramatic.

The devil is always in the detail and this week the federal government announced some transitional measures for its $150,000 contribution cap that mean people able to act before the end of the financial year can effectively get a full year's contribution allowance for the six or so weeks between the budget announcement and the end of the financial year.

Alternatively you could take advantage of the transitional averaging contribution rules that allow you to contribute $450,000 in any one year and then average it over three years.

Other options announced by the Treasurer's office include contributing $150,000 before June 30 this year and then a further $450,000 in July. But then you have hit the maximum limit and cannot make any more undeducted contributions until after June 30 2009.

The final option is to contribute $150,000 a year for the next four years. Either way you get $600,000 into super but the advantage of doing it earlier is that earnings are taxed at the lower 15% rate rather than marginal rates.

All of this makes a mockery of the notion that the new simpler super regime will suddenly render financial planners obsolete. More likely is that for at least the next 12 months financial planners will be in overload as clients rethink their situation and retirement savings strategies.

In all the excitement about the new super rules it is also worth remembering two other basic but worthwhile super tax measures - the co-contribution and spouse contribution.

The maximum co-contribution is available if you or a spouse earn less than $28,000 and can contribute $1000 to super. Do that and the government will top it up with a maximum of $1500. The government scales back its contribution on earnings above $28,000 and stop once you earn $58,000 a year.

Spouse contributions are another way of boosting super savings while getting a tax deduction. If you contribute up to $3000 into your spouse's account you can claim a tax rebate up to $540 although your spouse has to earn less than $10,800 for the full tax rebate to be paid.

The tax clock may be counting down on this financial year but Treasurer Peter Costello has ensured super will be top of the tax planning hit list for this and many years to come.


Date: 16 June 2006
Robin Bowerman

Principal & Head of Retail, Vanguard Investments Australia



  Financial Advisor | Financial Planner | Financial Adviser | Financial Planning | Financial Planner Sydney