Superannuation is a highly complex and ever changing area of Financial Advice.  We work with our clients to cut through the chaos and simplify this part of their investment portfolio.

What we can do for your superannuation:

-    Consolidate your super into the right fund for you
-    Show you the most effective way to build your super
-    Determine whether to make spouse contributions
-    Show you how to borrow to invest within super
-    Whether to establish a Self Managed Superannuation Fund

As Superannuation is a highly complex area, call us to see how we can assist you on 1300 651 564.

Superannuation

What is super?

Superannuation has been specifically designed and endorsed by the Federal Government as the preferred way to save for your retirement.  Superannuation has added taxation, asset protection and insurance benefits that make it particularly attractive for both the short and long term.

Why invest in super?

Superannuation can be a tax effective way to build your wealth for retirement.  The tax rates imposed on superannuation funds are as follows:

Investment Income: Taxed at a maximum of 15%

Contribution Tax: Maximum of 15%

Capital Gains: Taxed at 10% if the asset has been held for more than 12 months.  If the asset has been held for less than 12 months, the maximum tax rate will be 15%.

Income Streams: On commencement of an income stream the tax rate imposed on both income and capital gains within the account supporting the income stream is 0%.  Income payments from the income stream are also tax free for those aged over 60.  For those aged between 55 and 60, income payments (less any tax free amount) will be taxable and receive a 15% tax offset.

Additionally, your superannuation funds are generally protected from creditors as part of bankruptcy provisions, excluding any contributions made prior to bankruptcy with the intention to defeat creditors.

How can I get more from my super?

1.    Bump up your bonus

Salary sacrifice your bonus into super rather than receiving it as cash.  This reduces the tax on your bonus by up to 31.5% and allows you to make a larger after-tax investment.

2.    Invest personal assets in super

The tax-effectiveness of saving through your super fund can be very powerful. This is because investment earnings are taxed at a maximum rate of 15% and all benefits received at age 60 or over are completely tax-free.

With this in mind, why not consider cashing in an asset (such as term deposits, shares or property) and making a personal after-tax super contribution?  We would suggest discussing the taxation consequences this would trigger to your personal situation before selling any assets.

3.    A helping hand

If you earn less than $61,920 pa you could be eligible to receive a Government co-contribution to your super. To qualify for the full co-contribution of $1,000 you generally need to make a personal after-tax super contribution of at least $1,000, and earn less than $31,920 per year. A reduced co-contribution may be payable if you contribute less than $1,000 and/or earn between $31,920 and $61,920 pa.

4.    Top up your spouse’s super

If your spouse earns less than $13,800, make an after-tax super contribution on their behalf so you can receive a tax offset of up to $540 while increasing your spouse's retirement savings.

1. Includes assessable income, reportable fringe benefits and reportable employer super contributions.
2. To be eligible to claim a tax deduction, you need to earn less than 10% of your assessable income, reportable fringe benefits and reportable employer super contributions from eligible employment.

Do you have a number of super funds?

If you have changed jobs and not rolled across your superannuation, it is likely that you have multiple superannuation accounts.  Multiple superannuation accounts can make it difficult to manage your total super benefit.  You could also be paying unnecessary additional fees.

According to the former Minister for Superannuation and Corporation Law, Senator the Hon. Nick Sherry, there is approximately $12.9 billion in 'lost' super in Australia.  Source: Media statement from Hon. Nick Sherry, 5 January 2009.

If you haven't thought about consolidating your superannuation into the one account, here are some good reasons to start thinking about it now:

o    Potential to reduce the ongoing fees
o    One statement
o    You can lose track and lose your money

What should I look for when choosing a super fund?

Choosing a Super fund that’s right for you can be a difficult decision.  For many of us, superannuation is our largest investment so it’s crucial to understand what makes a good superannuation fund and how to avoid funds that don’t work for you.

When it comes to selecting your super fund, it is important to look at more than just fees and short-term performance.  

A good superannuation fund should provide more than just low fees and short-term performance.  A good superannuation fund should also provide appropriate performance for the level of risk you are comfortable with.  

Super fund’s investment choice

Your super fund should provide the flexibility to choose an investment strategy that is right for you, your personal preferences, objectives and the level of risk you are comfortable with.  As a minimum your super fund should offer you at least five different investment options to best match your objectives.

Deciding on the number of investment options you require will depend on the level of control you want over your super investments.  Some super funds offer only a couple of options while others offer access to the top 300 ASX listed shares and a choice of over 200 managed investments.

Super fund’s investment performance

Strong long-term performance of your super fund is critical to ensure that you have enough money by the time you retire.

When considering the past performance of alternative superannuation investment options, you should compare at least the last five to seven year return figures.  Looking at shorter periods can distort a funds long-term performance as short-term performance can be highly volatile and be an unreliable measure of long-term success.  Using short-term past performance as a guide for future returns is generally unsuccessful and tends to corrode your portfolio; not enhance it.

Additionally, it is highly unlikely that last year’s top performer will repeat their success.  It is therefore better to take a long term perspective.

Contact us to help you compare the performance of various super funds.

Super fund’s fees & charges

Another important consideration when selecting your super fund is to compare the costs, as the fees you pay will have an impact on the amount accumulated by the time you retire.  

The following are some examples of fee types applicable to many super funds:

Administration fees are charged for the administration of your super fund. These fees are generally charged as either a flat dollar amount or a percentage of your account balance. The administration fee can include a number of different fees such as the actual administration fee, trustee fee, responsible entity fee and expense recovery fee.

Management fees are charged by fund managers for managing the underlying investment in which you have invested. The management fee can be included within administration fees or they may be taken into account in the value of the underlying investments.

Contribution/entry fees are charged on the initial and sometimes subsequent investments you make into the fund or those made on your behalf.

Exit fees/penalties are fees charged when you either exit your fund or where you exit the fund within a minimum prescribed period of time.

Performance fees are charged by the underlying fund managers where they create performance greater than arranged standards. Performance fees are in addition to the standard management fees.

Trail commissions are an ongoing fee paid to a planner in the years after you establish a super fund, place an investment or purchase insurance.  Trail commissions are usually included in a fund manager's management expenses ratio (MER), which is disclosed in the Product Disclosure Statement.  

Other fees include investment switching fees which can apply when you modify the investment choice in your super fund; and buy/sell costs whereby the price you pay to enter an investment option is larger than the price you receive when you sell out of the investment.

The Harridge Group will look at your existing super fund to confirm what fees, charges and commissions you are currently paying.

Depending on your existing fund, we may be able to either rebate any commissions you are paying or recommend a new fund that does not pay any commissions.

We prefer superannuation funds that are transparent and clear about all fees and charges, with no hidden surprises.

Other key strategy features

Super funds should offer the ability to implement various strategies to boost or protect your retirement funds.

These should include:

-    binding and non-binding death benefit nominations
-    transparency of underlying fund managers
-    auto-rebalancing, and
-    nomination of specific funds for regular savings or withdrawals.

Contact us to discuss how these facilities may be of benefit to you.

Please Note:

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances.  Please seek personal financial and tax and/or legal advice prior to acting on this information.

Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.

The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate.