Re: So, forum financial gurus...

[skully]

Hehehe, nice. How much of the freebies did you get from the recent budget?

[JGK]

Nada.


Unlike the previous LNP Government, this one apparently doesn't believe that investment bankers who live in Mosman are battlers. Qunts.

[skully]

Well, I am surprised. I assumed you would've reduced your taxable income sufficiently by whatever dodgy means open to Bankers to get both Family Benefits Part A and B and taken what most pinkos believe is their god-given right, free money from the government.

[JGK]

It's a bit harder these days because just about everything gets included as "income" for FT purposes.

Although I do have a plan for next year.

[skully]

"FT"?

[Mick Sawyer]

Er, I am doing that in spades, MrK. I have a very healthy nest egg in the Chief's name to minimise tax payable on its earning. This will be used to supplement my allocated pension income post-55, which will be kept at a low enough level to avoid tax. Because of my age (born before 1964) I get a 15% discount on my tax between 55 and 60, meaning I can take about $50K in annual allocated pension tax free.

I am still unsure on the status of salary-sacrificed cash above the $25K Super contributions limit next financial year. It will be taxed at the full nearly 50% but is it counted in your taxable income or not?

If it is, I may as well just save the money post tax outside my Super in the Chief's name, for as long as her name exists. If it is not included as part of my taxable income (and I currently assume it wouldn't be) then while I still lose 50% of the over the $25K contributions to tax, my taxable income stays lower and avoids things like means testing of the Health Fund rebate, future flood levies, Disability Fund levies etc etc.

Mick seems to indicate that Super contributions salary sacrificed about the $25K concessional limit are clearly not part of my taxable income, but I just want to make sure before making decisions about what to do with the spare $25K I will have next Fin. Yr.

It seems a simple, even dumb question, but can someone give me a 100% clear answer??

Excess contributions will be taxed but do not form part of your taxable income. However, (this is really feckin important) where an individual has exceeded their concessional (e.g. SGC, salary sacrifice) contributions cap, the excess amount counts towards the non-concessional cap. That is, contributions tipped in from after tax income - the cap is $150k p.a. or up to $450k in a 3 year period. If the individual has already contributed up to their non-concessional cap in a particular year, this may result in the individual also exceeding their non-concessional cap.
Any excess non-concessional contributions are subject to a penalty tax rate of 46.5 per cent. Where a contribution exceeds both caps, the total penalty tax will be up to 93 per cent (15 per cent + 31.5 per cent + 46.5 per cent).

Making excess contributions can be beneficial but you really need to do some careful analysis before deliberately embarking. For the coming year taxable income in the $37k to $80k range has a MTR of 32.5%. That might not be a bad place to earn the additional income.

[Mick Sawyer]

skully, I forgot to add that your wife would have her own non concessional cap.

[skully]

Er, I am doing that in spades, MrK. I have a very healthy nest egg in the Chief's name to minimise tax payable on its earning. This will be used to supplement my allocated pension income post-55, which will be kept at a low enough level to avoid tax. Because of my age (born before 1964) I get a 15% discount on my tax between 55 and 60, meaning I can take about $50K in annual allocated pension tax free.

I am still unsure on the status of salary-sacrificed cash above the $25K Super contributions limit next financial year. It will be taxed at the full nearly 50% but is it counted in your taxable income or not?

If it is, I may as well just save the money post tax outside my Super in the Chief's name, for as long as her name exists. If it is not included as part of my taxable income (and I currently assume it wouldn't be) then while I still lose 50% of the over the $25K contributions to tax, my taxable income stays lower and avoids things like means testing of the Health Fund rebate, future flood levies, Disability Fund levies etc etc.

Mick seems to indicate that Super contributions salary sacrificed about the $25K concessional limit are clearly not part of my taxable income, but I just want to make sure before making decisions about what to do with the spare $25K I will have next Fin. Yr.

It seems a simple, even dumb question, but can someone give me a 100% clear answer??

Excess contributions will be taxed but do not form part of your taxable income. However, (this is really feckin important) where an individual has exceeded their concessional (e.g. SGC, salary sacrifice) contributions cap, the excess amount counts towards the non-concessional cap. That is, contributions tipped in from after tax income - the cap is $150k p.a. or up to $450k in a 3 year period. If the individual has already contributed up to their non-concessional cap in a particular year, this may result in the individual also exceeding their non-concessional cap.
Any excess non-concessional contributions are subject to a penalty tax rate of 46.5 per cent. Where a contribution exceeds both caps, the total penalty tax will be up to 93 per cent (15 per cent + 31.5 per cent + 46.5 per cent).

Making excess contributions can be beneficial but you really need to do some careful analysis before deliberately embarking. For the coming year taxable income in the $37k to $80k range has a MTR of 32.5%. That might not be a bad place to earn the additional income.

Many thanks, Mick. I assumed this was logically the case, but have really struggled to get a straight answer. Even my Super Fund couldn't answer it. Perhaps I wasn't clear how I asked the question.

The extra info on the non-concessional cap is also really valuable (thanks heaps for that). This was information I was not aware of (that contributions above the $25K will count towards the non-concession contributions). I won't go anwhere near exceeding the $450K 3 year limit, but have to be careful with the $150K p.a. limit next year, as I have some other maturing real estate deals that I was gonna use to contribute non-concessionally to my Super. The bit about the Chief's income is also very handy, although life expectancy and her will have to be taken into account.

So the taxable income issue remains the main driver for me. I will have to investigate (in the next few weeks) just what things a higher taxable income are likely to affect (if I chose not to salary sacrifice the additional $25K that I have been contributing to my Super up to now).

[JGK]

"FT"?

Sorry, FTB - Family Tax Benefit.

[skully]

Cheers, MrK.

[skully]

Sorry Mick, one last dumb question. Just confirming the non-concessional Super contributions tax rate. The ATO website says (as you point out) that they are taxed at 46.5%, but it is dated July 2011.

So this rate doesn't change as other tax rates do in 2012-13? I think you clearly say this in your educational post above, but just making 100% sure. And earnings over a taxable income of $80,000 will attract a tax rate of 38.5% (37% + Medicare Levy) in 2012-13?

If this is the case, there is a clear 8% advantage (46.5% - 38.5%) in NOT contributing over the $25K non-concessional limit. Looks to be much better to stick any surplus away in an ING Term deposit at 5.5% in the Chief's name (interest earnings taxed at 34% incl. Medicare Levy - the wee bit of part time work she insists on dragging herself off to each week plus her interest earnings take her over the $37K threshold).

[Mick Sawyer]

Sorry Mick, one last dumb question. Just confirming the non-concessional Super contributions tax rate. The ATO website says (as you point out) that they are taxed at 46.5%, but it is dated July 2011.

So this rate doesn't change as other tax rates do in 2012-13? I think you clearly say this in your educational post above, but just making 100% sure. And earnings over a taxable income of $80,000 will attract a tax rate of 38.5% (37% + Medicare Levy) in 2012-13?

If this is the case, there is a clear 8% advantage (46.5% - 38.5%) in NOT contributing over the $25K non-concessional limit. Looks to be much better to stick any surplus away in an ING Term deposit at 5.5% in the Chief's name (interest earnings taxed at 34% incl. Medicare Levy - the wee bit of part time work she insists on dragging herself off to each week plus her interest earnings take her over the $37K threshold).

Rates are changing over the next few years. I'll put up a full table tomorrow.

[skully]

You're a fine chap.

[Mick Sawyer]

Just confirming the non-concessional Super contributions tax rate. The ATO website says (as you point out) that they are taxed at 46.5%, but it is dated July 2011.

The top personal rate & the threshold (i.e. 46.5% at > $180k) remain the same through 2015/16, therefore the excess penalty also remains at the current 46.5%

.... earnings over a taxable income of $80,000 will attract a tax rate of 38.5% (37% + Medicare Levy) in 2012-13?

The MTR applying to taxable income in the $80k to $180k band also remain unchanged through to 2015/16 at 38.5%, as you say.

Looks to be much better to stick any surplus away in an ING Term deposit at 5.5% in the Chief's name (interest earnings taxed at 34% incl. Medicare Levy - the wee bit of part time work she insists on dragging herself off to each week plus her interest earnings take her over the $37K threshold).

Income in the $37k to $80k range will be taxed at 34% (32.5% + 1.5%) for the next two income years rising to 34.5% in 2015/16.

I understand there are other issues at play but the cheapest tax would be within super in your wife's name.

[skully]

Cheers Mick.

[bodyline]

I've seen up to 5.6% for 90 days.

[bodyline]

Rates

[Mick Sawyer]

I've seen up to 5.6% for 90 days.

With who?

[bodyline]

Rates

[Mick Sawyer]

Cheers bl

[JGK]

An article from Morningstar on why you shouldn't invest in TDs (albeit written by a fund manager!). Have put it in the spoiler so as not to seem Kartiesque.

Spoiler:

[Mick Sawyer]

An article from Morningstar on why you shouldn't invest in TDs (albeit written by a fund manager!).

I'll get to all that a bit later.

I read the other day that there's currently $1.3 trillion lying in cash around the country at the moment.

[skully]

An article from Morningstar on why you shouldn't invest in TDs (albeit written by a fund manager!). Have put it in the spoiler so as not to seem Kartiesque.

Spoiler:

All very well for him to say. When I look at the Equity components of my Super account, all (I have 8 Aus + International equity funds) are in the negative except one. When they are all in positive return territory again I will look at getting back into shares. Over 70% of my Super is currently sitting safely in TDs. So fark Mr Needham with a bouquet of barbed wire.

[skully]

One more question for the Gurus.

The Means Testing of the Health Fund Rebate kicks in on July 1, 2012 (yet another quntish pig-ignorant act by the Pinkos). There is a remarkable lack of info on this Means Test. The best I can find is a page on the ATO website from 2010 which states that there will be three tiers. The doc states for combined family income of $168K to $194K the rebate drops to 20% and the medicare levy surcharge increases by 1.0%. For $194K to $260K the rebate drops to 10% and medicare surcharge increase by 1.25%. Combined income above $260K loses the 30% rebate and incurs a medicare levy sucharge of 1.5%.

Is this table correct and am I right in understanding that those couples that, for instance, fall into the first tier will have to pay 10% more on the Health Fund premium AND 1.0% extra each on their medicare levy?

[bodyline]

An article from Morningstar on why you shouldn't invest in TDs (albeit written by a fund manager!). Have put it in the spoiler so as not to seem Kartiesque.

Spoiler:

All very well for him to say. When I look at the Equity components of my Super account, all (I have 8 Aus + International equity funds) are in the negative except one. When they are all in positive return territory again I will look at getting back into shares. Over 70% of my Super is currently sitting safely in TDs. So fark Mr Needham with a bouquet of barbed wire.

I have my doubts as to whether a number of Property Trusts have sufficient impairement on there properties - and I wonder what the real impairment amount would be for banks with first mortgages over res property given the decline in res property values.

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