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Check up on savings

Posted on April 11, 2014 by admin


Older individuals often forget to perform checks on their retirement savings. It is essential that individuals check that their retirement savings are on track to finance their planned standard of living in retirement. Otherwise, they could be left short when they are ready to retire. A common time to perform these checks is in the final decade before the date of intended retirement; however, it is a good idea to perform them throughout a person’s working life. Performing these checks can also allow an individual to focus on maximising their super in the countdown to their retirement. Policymakers are also interested in retirement savings checks as it allows them to gain an understanding of whether Australia’s retirement savings will be adequate, or if there will be strong demand for the age pension.


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Division 7a in detail

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Business owners sometimes borrow money from their own company for a variety of personal and financial reasons. However, there can be an issue with tax law compliance if the proper steps are not carried out in treating the transaction correctly. Division 7a is an integrity measure of tax legislation that comes into effect when there is a loan by a company to the business’ owners and associates, i.e. the shareholders of the company. Associates are broadly defined and can include family members and other related entities. Specifically, this tax law covers any monetary benefits including: -payments made to a shareholder (or associate) by a private company, including transfers or uses of property for less than market value -loans made without specific loan agreements -debt forgiveness These transactions may come under the Division 7a provisions and as such are treated as assessable unfranked dividends to the shareholder or associate, and are taxed accordingly. An assessable unfranked dividend means that there are no franking credits available to the recipient, so the franking tax offset will not apply and the recipient will have to pay tax on the dividends at the usual marginal rate. However, there a few instances in which Division 7a […]


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Tax certainty after death for super funds

Posted on April 3, 2014 by admin


Recent government amendments have provided tax certainty for superannuation funds upon the death of members in receipt of a superannuation income stream. This amendment effectively allows a superannuation fund trustee to dispose of pension assets on a tax-free basis to fund the payment of death benefits. Also, the meaning of ‘superannuation income stream benefit’ now allows the superannuation fund to continue to be entitled to the earnings tax exemption in the period of the member’s death until their benefits have been paid out by: -paying them out as a lump sum -and/or commencing a new income stream This is subject to the benefits being cashed as soon as possible following the member’s death. This amendment also allows the tax-free proportion of that superannuation income stream to be used in calculating the tax components of those benefits.


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Power of attorney and guardianship

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As people get older they need to make arrangements on how to handle their estate, and their personal interests in the event of sickness or death. These include: Enduring guardianship A guardian is essentially a legally appointed substitute decision-maker. A guardian is granted powers only as is necessary to accomplish what an individual cannot do independently. Individuals can choose to create a legal document called an ‘enduring power of guardianship’ that authorises a person to make personal, lifestyle or treatment decisions on behalf of themselves.  A guardian can also be appointed by the courts. Unlike the power of attorney, each state has a guardianship board or tribunal which supervises the guardian. The most common functions of a guardian are making decisions on accommodation, health care and medical and dental treatment. Enduring power of attorney (financial) A financial ‘enduring power of attorney’ is a legal document that remains valid if the nominator becomes mentally incompetent.  The agent who is appointed can make any legal or financial decisions on the nominator’s behalf. The appointed attorney is able to make a decision on property or financial affairs, for example, operate bank accounts, pay bills and purchase and sell property. Enduring power of attorney […]


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How to catch out an illegal super scheme

April 18, 2018

When a super scheme seems too good to be true, it often is. Many illegal super schemes are operating in Australia, so it is crucial to understand the characteristics of such schemes.

A popular illegal scheme is one whereby an individual is enticed by being told they can access their super early to pay off a credit card debt, go on a holiday, buy a car and so on. Generally, such schemes are illegal as superannuation can only be accessed early by meeting a condition of release.

Those promoting such schemes usually:
– Encourage individuals to transfer super from an existing super fund to an SMSF to access super before they are legally entitled to;
– Target those under financial pressure or who do not understand the super laws;
– Claim you can use your super for anything you want;
– Charge high fees and commissions, and risk losing some or all of the individuals super to them.

Unfortunately, participating in these schemes subject the affected individual to identity theft from the promoter of the scheme. Identity theft is when someone uses another person’s details to commit fraud or other crimes.

Individuals need to be aware that super is usually only accessible once the preservation age is reached and they stop working. The preservation age is currently 55 years old for those born before 1 July 1960 and 60 years old for those born after 30 June 1964.

Superannuation can only be accessed early in special circumstances such as severe financial hardship and for specific medical conditions. There are severe penalties for illegally accessing your super early.