We are quitting work and travelling around Australia. How will it affect our super?

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Q. My partner and I regularly listen to your financial advice segment on Radio 4GR Toowoomba on Sundays. Congratulations on a very interesting show.

We are aged 57 and 52 respectively, currently working full time and we each have superannuation policies. Later this year we plan to resign from our jobs and go on a working holiday around Australia for an indefinite period.

We are both going to roll over our superannuation policies. Also we plan to set up an ABN as this seems to be a requirement of some of the farms on which we are going to work.

In order to avoid fees eating up what we have saved in our superannuation policies we are going to make regular payments into our respective policies.

We have two questions

1. are there any tax advantages in making payments into our superannuation policies from our joint ABN account; and

2. is there a set % requirement based on the gross as to what we are required to pay into our superannuation policies e.g 9% or as self employed is that up to us.

We hope you can help. Looking forward to your reply

Josies answer: Thank you listening to Money Matters and I greatly appreciate your feedback. I am having so much fun and thoroughly enjoy answering questions on the radio and this website.

It is obvious there is such a great need for this type of service. Read more

I am business owner and I am questioning my accountant’s advice.

Q. We are business owners and our accountant has us pay a designated amount into super each month. We are reluctant to do this at the moment and have that amount lose money immediately when banks are offering over 8%. Should we try to delay these payments?

Josie’s answer: I am finding that many people are asking similar questions. Why put my money into superannuation when they might get a higher return by investing in a cash management account or term deposit outside of super. This is where a little research and homework will make it a lot clearer and thank you for asking this great question.

When thinking of superannuation, do not think of it as an investment. This is a common mistake. Superannuation is simply a trust which offers amazing tax concessions. For example, if you had a family trust, would you be asking the same question? Probably not.

Firstly, I will discuss the tax benefits. Lets say your monthly contribution to superannuation Read more

Financial Hell - Please help!

Q. I could really do with some help. I have been trying to sort my finances out for the last 5 years but spending a lot of energy standing still.

After ten years of marriage my wife decided she didn’t want to be married anymore.

My ex-wife retained the majority of the matrimonial assets such as our flat and car. I accumulated a debt of $20k from legal bills etc as it took a long time to arrive at a property settlement. The debt is sitting on five credit cards which I planned to close and consolidate into a personal loan as soon as possible.

However, after the five years I still can not obtain a personal loan. I naturally had to find a new place to live and I have had three changes in job in the last three years due to factors such as contract work.

I now have almost completed 3 months in a permanent on-going position with a university. I have cut my personal budget back to the absolute bare minimum and kept up the interest payments on the credit cards but I do not have perfectly clean bills.

I have tried banks, credit unions etc but with no success in terms of debt consolidation. I have been advised with a salary of $53,500 that I would have no problem servicing a loan but can only apply for unsecured loans as I have no security.

The debt is starting to become more difficult to manage. Can you suggest or offer any other options, strategies or suggestions besides a debt agreement or bankruptcy?.

Josie’s answer: You really have been through a lot in recent years. It appears that your ex-wife received the goldmine and you got the shaft.

I am also tired of hearing stories of people struggling to get out of debt because of lawyer Read more

I have $100K after selling my house. Should I buy another house or invest the money?

Q. I am 40 years old with 1 child in college 16 yrs old. I have $100,000 after selling my house. I work 4 days per week and earn 616.00 gross should I buy back into the market or am I better of to invest my money and rent.

Josie’s answer: Good question and would love to have a crystal ball. There is so much talk that the property will stagnate in the next year or two, and of course it depends on where you plan to buy (some areas seem to be doing OK).

From a purely numbers perspective, there is plenty of research to suggest people are better off renting than buying, but only if they invest the difference.

Most of us don’t have the discipline to do this.

From my perspective, I prefer to be a home owner as it gives me a sense of security. I hate the idea of a landlord telling me what I can or can’t do, Read more

Does an employer have to pay Super to someone who is working 24 hours per week?

Q. Does an employer have to pay the superannuation guarantee charge to someone who is working 24 hours per week?

Josie’s answer: Yes, they do, however, they are exempt from paying super for the following:-· employees paid less than $450 in a calendar month· those aged aged 70 years or more· employees less than 18 years of age and working less than 30 hours per week· non resident employees· employees who are paid for domestic or private work, less than 30 hours per week. Read more

My son is on a Disability Pension and I want to invest money for him.

Q. I have a son aged 18 who has a disability and have just been arranging to set up a Special Disability trust via my will. I believe that Income resulting from this will not affect his disability pension.

If I were to invest some money for him now, I am wondering if there is an option that would have less impact on his disability pension now. Is it best to have an investment in my name rather than his so that when I die that money goes into his trust fund.

Josie’s answer: As you are probably aware, the intention of a special disability trusts is encourage families to make their own arrangements for family members with a severe disability.

It is great to see the Government acknowledging the contribution carers of disabled people are making to our community.

A big advantage of establishing one is that the ordinary Centrelink means test rules do not apply.

Most importantly, the trust must be established for the sole purpose of providing care and accommodation for a person with a severe disability. Read more

$1500 Co-contribution for my children and excessive fees in super funds

Q. I phoned your Money Matters show last Sunday & asked about investment option for my 14yo daughter who has 2 jobs.

You suggested super, to get the govt incentive. She is not earning enough to pay super yet, though a fund has been set up by employer.If she pays in herself, & gets govt incentive, won’t all that be eaten away by fees as she will not be earning enough from either employer to be paying super for some time yet?

Everything my 19 yo daughter has paid into super (by employers) so far has gone in fees. She actually has a negative balance on her super a/c.

Josie’s Answer: I certainly remember your call and was particularly impressed by your two very hard working kids.

I suggested researching the possibility of taking advantage of the super co-contribution scheme, whereby those earning less than $28,980, are eligible to receive $1500 from the government if they contribute $1,000 of personal contributions into their superannuation account.

There is no minimum age requirement, but they need to working, lodge a tax return and you need to ensure that the money is debited from their own bank account.

Read more

Do I get a refund of tax when my super is negative?

Q. Investment earnings in superannuation are taxed at 15%. What happens when your super fund makes a loss? (as may well be for me again this year). Is there no tax? Is there a credit (I wish) or is the loss offset in future years within the fund?

Josie’s answer: This is a really good question and one I am sure lots of visitors to www.askjosiekay.com and listeners of Money Matters will have similar thoughts.

I am also assuming that your superannuation contributions are invested in an industry or retail superannuation fund (in other words, they are managed funds). You are right in stating that investment earnings in superannuation funds are taxed at 15%, however, this the maximum they pay.

In reality, they are probably paying a lot less, particularly if they are invested in shares as they can offset imputation credits attached to shares (in simple terms, they get a refund of any company tax, up to 30%, that may have been paid on the dividend when it is passed on to superannuation fund).

Therefore, you are probably paying a lot less than 15% and may even get a rebate of excess franking credits. I know a bit technical, but this is a good thing. Read more

Term deposit or super - Which one is best for me?

Q. I have $17,100 in first state super I’m retired on a carers pension and am 54yrs old, I wish to invest $20,000 I don’t know if I should go with our bank in a term deposit at 8.1% or put it into my super?

Josie’s answer: Assuming you are not working and your sole income is the carer’s pension, then there is no significant advantage to contributing to super as the earnings within super are taxed at a maximum of 15%.

A possible advantage of contributing the funds to superannuation would be to maximise the pension should your investments exceed the income and assets test.

The reason for this is that you are under age pension age and funds held in superannuation funds are not counted.

Read more

My Self Managed Super Fund is too volatile and expensive.

Q. My Husband and I have a SMSF (at the suggestion of our Adviser) of about $600K, I have an Industry Fund i.e. First State Super (NSW) of around $99K, with a diversified portfolio we are paying our adviser 1.25%, plus the accountant for the Tax return.

During the times of extreme volatility the Industry fund was not “hammered” nearly as much as our own fund, we are considering moving all funds to the Industry,as the fees are much less. Can or should we and what could be the implications e.g. CGT etc We are both 57 and not working and may need to draw down in the near future.Josie’s answer: As you did not mention where your funds are invested within your Self Managed Superannuation Fund (SMSF) it is difficult for me to provide an opinion as to whether you should redeem these investments and transfer to an industry fund, such as First State Super (NSW). However, I would like you to think about the following:-

Read more

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