Many of us have held a number of super funds over our working lives. These various superannuation balances can be quickly identified by visiting www.findmysuper.com.au, then consolidating these funds within one appropriate fund will ensure that you have the maximum amount of capital working, while cutting out multiple administrative fees, reducing costs and increasing retirement benefits.
Life insurance in this day and age is a necessity. However, it must be purchased with after-tax dollars when held in your name, yet if life insurance is held in super, payment is tax-deductible, resulting in large savings. Payments can be funded either out of your super guarantee (9%), improving your weekly cashflow, or as an additional salary sacrifice, which is tax deductible.
The trigger for this is your age, not whether you are working. It is understandable that for any number of reasons many of us are happy or need to continue working slightly longer than traditionally we would have in previous times. Many super trusts allow the option to trigger retirement in super while you are still working (a simple deed amendment will allow this if not currently available). The benefit of this strategy is that your super fund will no longer be taxed on income or capital gains from your pension balances. You will need to draw an annual pension, but this can be re-contributed if not needed. In your hands, the pension will not be taxed if you are over 60 and taxed at your marginal tax rates less 15% if you are between 55 and 60, greatly increasing cashflow.
The ATO is increasingly clamping down on late tax returns, but tax office penalties should not be the only incentive to avoiding tardiness. Delaying your income tax returns can add additional costs and deprive you of funds if a refund is expected. Even if you are required to pay additional tax, it is recommended to start early and withhold lodgment until your due date. Working through a registered tax agent can allow you up until May 15 in the next year for lodgment.
Savings can be made by reviewing and consolidating existing insurance policies. Many Australians do not consider changing their existing insurance policies for a better deal, normally because they are concerned that they will need to undergo a new medical examination, which may impact costs or benefits of that policy. However, if you have undergone a medical in the past five years, in most cases there is no requirement to undergo another if there is no loading applicable and the same amounts are carried to a new insurer who in turn may be able to offer you a more competitive deal. There could also be benefits in having different policies with the one provider so as to source discounts.
There is an increasing amount of scrutiny on the financial services industry and the big super funds in terms of the value of their advice and returns in recent years. Many Australians are now opting for a more independent route in order to maximise their future financial wellbeing. A self-managed super fund may be the right option for you. Talk to a specialist SMSF adviser, who can not only discuss the normal areas such as insurance and investment plans but also understands the law and tax applicable to these funds. Many people are now using their SMSFs to purchase property with debt, but if poorly executed, this brings unintended penalties so work with a specialist to maximise your returns. Other useful sources of information include joining specialist associations such as the Australian SMSF Members Association, which is a voice for members and not driven for the benefit of the profession.
There is a lot of value in investing in improving financial literacy. Not knowing is like throwing money down the drain; as many of these steps show, simply altering the way existing finances are structured can dramatically increase your cashflow, giving you that added flexibility to generate more wealth, whether that be through property or other investments.
Ken Raiss is a certified accountant and director of Chan & Naylor national accounting firm. Ken’s experience lies in working with large publically listed multi-national companies, which gives Ken excellent insight into international market trends. Ken specialises in educating “mum and dad” property investors and small business owners with advice on wealth creation, asset protection, taxation, superannuation and compliance.
This article first apppeared on Property Observer.
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