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In reply to: mme on Thursday 11/05/06 11:14am



Interest on moneys borrowed to put into super is not tax deductable for employees and self employed persons under S 67AAA(1) tax act.


The other part of your ques a little more complicated. If you still need that answered PM me and will give you my phone number rather than type for half an hour.... It'll cost you a share tip on something thats going up 10% tomoorow http://www.sharescene.com/html/emoticons/laughingsmiley.gif



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This discussion started over on the CST (Cellestis) thread but has become so interesting that we are in danger of the Mods warning us for being off topic. Additionally, it is no doubt a topic of interest to folk other than CST holders (though, of course, CST holders are the ones who are going to end up with huge superannuation funds http://www.sharescene.com/html/emoticons/smile.gif )


Anyway, I'll start it off by posting the link to the document that describes the proposed new superannuation rules put forward by Mr. Costello in the budget.




I highly recommend this document to anyone that is interested in providing for their own future.


I apologize in advance if there is already a thread covering this but I couldn't find one on a cursory search.


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Just trying to bring some context to this I have bought this over from the CST thread, as posted by CountryBoy.


The earnings of a super fund are tax free to the extent they are, or will be, applied to the payment of pensions. That is to say, if there is one member of the fund and that member elects to take a pension, the fund will be entirely tax free, whereas if there is more than one, an exemption from tax is claimed in the ITR for a proportion of the income, based upon the equitable allocation of earnings between the members, the claim for exemption being the amount allocated to those who are being paid pensions. If the tax on the remaining income is exceeded by the imputation credits, that excess is refunded by the ATO to the fund.
That is the case now and that will continue.
From 1/7/07 all withdrawals from the Fund, whether lump sum or pension, will be tax free in the hands of the payee.
This is not the big deal with many small funds, because the annual pension amount does not reach $20,000 and the pensioner receives a full senior aged tax offset which wipes out the tax anyway. It is of real advantage to those who have larger amounts in their super funds. I know of people who will save $50,000 to $60,000 per annum in tax when the law is changed.
You will be permitted to decide when and how much you withdraw from the fund up to age 75. So clearly, if you are the only member in your fund, you will change your fund to a pension fund when you turn 60, pay yourself a pension of $1 per year and restart your employment. Then you will turn your fund into a tax free structure and contribute all your free cash (up to $150,000 per annum) and never pay tax or cgt on your investments again. This is what I call extremely attractive.
Furthermore, the RBL limits have been abolished. This is unbelievably fantastic for those whose fund is so large it will exceed the reasonable benefit limit. One person I am aware of has a fund of $M1.1 and he is only 48 years old. He was heading for some real irritation when he turns 55 on 60 or whatever, because the RBL is $M1.3 or so. Now he can go for broke. The new rule on contributions is that you may contribute up to $50,000 PA only. That is a real advantage for young high earners. There will be some young people who will provide superannuation of the equivalent of $M4 or $M5 today.
Personally, I believe they will re-think the situation and impose a maximum pension limit, like they do now. Otherwise people will run out of dough.
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In reply to: forrestgump on Friday 12/05/06 09:36am

Hi forrest,

Great idea to separate the two threads, and starting a new one will be important for us all because dramatic changes to the superannuation landscape are unfolding. This can be a vehicle for us to all share knowledge and experiences. The less professional advice we have to seek to understand what it all means, will save us many $$$ and give us satisfaction for looking after our own affairs.


Countryboy I also am of the opinion you must pay a minimum pension ie 4% from July next year. If this was correct the top end of town would have a picnic and the govt would miss out on a lot of revenue going forward with no chance of a clawback.Interesting to see more details of how it works.


My friend who is a former accountant and tipped me off last night that I had overlooked the new reduced minimum pension payments, also pointed out that besides none of our future pension payments forming part of our declared income which then meant other personal income was taxed at our top marginal rate (ie on top of our pension whatever that was) we also do not now pay any medicare levy on superannuation payments. Even etp payments which attracted 16.5% tax (less if you had pre 1983 days) included 1.5% medicare levy.


These new proposed super changes bring into question the need for private investments which include negative gearing through margin lending, simply because assets may be best held in a tax free superannuation pension environment imho. Everybody's circumstances are different but the investment landscape is certainly changing.




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QUOTE (Thumbs Up @ Friday 12/05/06 11:35am)

All interesting stuff CB, however it is still complicated and consultants will still be in a job.


There is the argument that our super is back to front - contributions and earnings should be tax free with subsequent pension being taxed at normal rates. I dont know if they do this in other countries - the govt would miss out on tax for some time. In lean years after tax and admin PAYG super battles to break even leaving the average worker behind.


Mr Keating was quick to point out the shortfalls of this budget, but it was he who brought in contributions tax.

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In reply to: forrestgump on Friday 12/05/06 10:05am

G'day Mr G.

Good topic.Thanks.

There is a SMSF topic but that of course does not encompass those working for an employer.

Nicely pre-empted. http://www.sharescene.com/html/emoticons/wink.gif

Super needs to be discussed and understood by all.


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In reply to: Thumbs Up on Friday 12/05/06 11:35am

Probably one could sum up the budget and some prior to this is the shift from taxing income and investments to taxing consumption.


The changes in tax rates makes -ve gearing less attractive for most and saving more attractive.


I need to get across the details of "new" super a bit better and hope that some clever tax / accounting folks tke part here .

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In reply to: balance on Friday 12/05/06 11:56am

Very interesting comments on this thread. I am particularly interested as I leave my day job in 6 weeks. i.e. retiring.


I run my own SMSF which has more than reasonable benefits limit $$ in it. I also run my own investment company. It too is travelling very well with large profits being generated.


I will pull out a capital sum from SMSF to pay off my mortage.



I also want to set up a new SMSF for my wife using funds from both above. Reason: greater security for her with less risky portfolio.


As`I read it tax will become a thing of the past after 1/7/07 on change to pension mode. If necessary I can pay myself a salary from my investment company next year, which is transition year. I was 61 yesterday so age isn't an issue.


Appreciateand wise council from those with knowledge.



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