# SMSF - is this really true?



## yonnie (14 May 2007)

if its true, wowwwwwwwwwwwwww

hi people,

I`m 57, married to a beautiful woman and just starting to set up a SMSF.
We are share traders and play around with $ 450,000 with a short/medium term strategy. Our net profit will be around $ 75,000 each for 2006/07 and I had wages of $ 2,400 and her wages about $ 10,000 this year.

Now what do I hear?????

Make cash deductable contributions before 1 July 2007 so much so that our personal maximum tax rate is 15% and pay 15% on the deductions.
Then transfer the shares in specie before 1 July 2007

From 1 July we retire, withdraw from the SMSF a pension,
keep trading in our SMSF and pay noooooooooo tax at all.

Is that a wet dream or what???


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## Julia (14 May 2007)

yonnie said:


> if its true, wowwwwwwwwwwwwww
> 
> hi people,
> 
> ...



Yep, yonnie.  Pretty good, isn't it.
The other option is to keep your SMSF in the accumulation phase and just pull out lump sums (tax free) as you need it, thus avoiding the need to set up an allocated pension.  

I'm just wondering about your being 57. Are you sure the above applies if you are under age pension age?  I don't know about this and need to know for myself before too long.


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## lesm (14 May 2007)

Julia said:


> Yep, yonnie.  Pretty good, isn't it.
> 
> I'm just wondering about your being 57. Are you sure the above applies if you are under age pension age?  I don't know about this and need to know for myself before too long.




yonnie,

As Julia suggested, think you should check this out and have it verified via an authoritative source.

The following is an extract from the FIDO site (http://www.fido.gov.au/fido/fido.ns...hanges+to+super+from+1+July+2007?openDocument) maintained by ASIC:



> *Proposed changes to super from 1 July 2007*
> 
> Please note that Parliament has now passed laws that will limit how much you can contribute to super after 1 July 2007. If you're planning large contributions, you may need to read more about the incoming rules.
> 
> ...


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## AJ_ (14 May 2007)

Hi,

I am 24 years old, and love trading/investing... 

Should I do this in a SMSF environment, or should I just stick to doing it under my name (paying income tax etc)

Because obviously there is a long time until IU retire, so I was thinking that there is not much point in a SMSF at this stage as I won't be able to touch any money until i retire.... (unless you can withdraw money from a superfund ?)

But I'm not sure if this is correct thinking and wise money management/tax minimisation....


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## grumpee boi (15 May 2007)

Pension income is tax-free from age 60 onwards.  In specie contributions can still trigger a CGT event.  You can transfer up to 1 mill up to 30 June and after the changeover 150k pa or roll 3 yrs into 1 with a 450k contribution if under 65.

AJ, young people generally are better off outside the super environment with all the flexibility that access to cash/investments can provide.  Having said that, if applicable the government co-contribution is a good way to get bang for buck.  150% return risk free can add up.

Adam


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## deftfear (15 May 2007)

AJ, most accountants (and the ATO as well I think) recommend that you need to have over $200,000 in a smsf before they are worthwhile, as the accounting fees chew up a lot of your profits. If you have a very profitable record in the past, it may be worthwhile to set one up with less cash, but then you also have all the hassle of looking after a smsf which can take time.


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## yonnie (15 May 2007)

hello people,

look at the web site of Nicholas Needham
nicholasneedham.com.au

it says there that from 55 to under 60 you can receive an allocated pension and the portion that is UDC and Pre 1985
is tax free.

I just assumed that UDC is undeducted contributions and I will make a lot of that.

So when I start taking out an allocated pension, my SMSF pays no tax on any profits/CGT and I only pay tax on the part that has been deductable.
You got to withdraw at least 4% of your account per year.

Thats how I understand it,  but have a go yourself


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## yonnie (15 May 2007)

hey Julia,

can I take out lump sums tax free under 60?

and what is the accumulation phase of a SMSF exactly?

thanks


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## Pat (15 May 2007)

grumpee boi said:


> Pension income is tax-free from age 60 onwards.  In specie contributions can still trigger a CGT event.  You can transfer up to 1 mill up to 30 June and after the changeover 150k pa or roll 3 yrs into 1 with a 450k contribution if under 65.
> 
> AJ, young people generally are better off outside the super environment with all the flexibility that access to cash/investments can provide.  Having said that, if applicable the government co-contribution is a good way to get bang for buck.  150% return risk free can add up.
> 
> Adam




Adam, You sound just like a FP. LOL! you must have been one or are one?  



yonnie said:


> hey Julia,
> 
> can I take out lump sums tax free under 60?
> 
> ...




yonnie, you may not take out "super" monies until you have met a condition of release. ie: reach preservation age and retire, financial hardship etc. 
Preservation age is currently 55, so anyone 55 yrs of age and fully retired may access there super. 
As it stands, most withdrawals from super are subject to tax, much the same as contributions are. As of July 1st, There is no withdrawal tax for over 60's. WOW! that'll get some votes.

Not sure about SMSF's and the whole tax loop hole thing. Am very interested and would like to learn more.


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## AJ_ (15 May 2007)

that sounds pretty good, it's like money for nothing.. however there is one flaw:

if you earn $28,000 - $58,000, then the co-contribution available is:

An amount equal to the lesser of:

personal contribution X 1.5, or 
$1,500 - [0.05 X (AI - $28,000)]  

so if you earn $50k, the co-contribution is only $400, not the full $1500



---------------------------------

okay, so the consensus seems to be that for my age, a SMSF is not the best way to minimise tax... are there any suggestions ? form a company or a trust ? i'm not very knowledgable on these things, but if there are any ideas, i'd like to check them out.


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## grumpee boi (15 May 2007)

yonnie,
lump sums for those under 60 comprise of 2 components - taxable and non-taxable (exempt).  The taxable component can have a tax-free lump sum withdrawal of 140k from 1 July with any excess taxed at 15%.  The exempt component (which includes your UDC) is, well, exempt from tax.

If you make large UDCs then yes they will be treated as currently when drawing them out as a pension for those under 60 and over 55.  Here are some examples discussing undeducted contributions under the current arrangements.  After turning age 60 the pension will simply become tax free as will any lump-sum withdrawals.

Pat,
Yes I am an fp.  But I do have a personality - honestly.   

adam


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## explod (15 May 2007)

I am 61 years and have had a SMSF set up for 8 years.   A third of the fund is in shares which I actively trade on the market myself.   I take an allocated pension so have cut out capital gains.  It is a wonderful shelter and anyone near to or 60 plus ought to set up thier own fund and put in as much as they can afford before 30 June.  I got rid of property to do it and I believe investments in resources will outdo property in the forseeable future anyway.     I just recieved a book via the Forums bookshop "The Self Funded Superannuation Fund Handbook" which is invaluable if you are going that way.

cheers to all and happy trading and retirement combined


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## grumpee boi (15 May 2007)

AJ,

Still a 40% return on investment risk free though.  

I am doing some work for my brother in law who is slightly younger than yourself.  We are starting off with a simple regular investment plan of 5k then 1k per month.  When he has some experience and feels confident then we will use instalment gearing to borrow an additional 1k per month.  he will then be investing 24k pa.

The flexibility I talk about is the fact that the investment can be liquidated at any time if his needs, wants, etc change.  ie gets married, wants to buy a house.  Modelling suggests he only needs slightly more than 1k per month until his desired retirement age to achieve the income he desires in retirement.  so realistically he should be able to still save a house deposit in the interim without needing to liquidate.

Adam


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## Pat (15 May 2007)

grumpee boi said:


> yonnie,
> Pat,
> Yes I am an fp.  But I do have a personality - honestly.
> 
> adam




I can tell, It's there... somewhere?   LOL!

Actually I speak to alot of planners and there cool...


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## Wysiwyg (15 May 2007)

Hi..a question to all,What is the % rate of tax on smsf capital gains (stocks)?

a)within 12 months
b)outside 12 months

I was told it is 15 % ,regardless of time frame!


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## Prospector (15 May 2007)

I think it is 15% under 12 months and 10% after 12 months?


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## yonnie (15 May 2007)

in my new SMSF I want to have the freedom to trade everything possible, be it cfd`s, futures without borrowing ofcourse.

anybody have investment strategy and risk management strategy documents they wouldn`t mind sharing so that I have an example?

thanks


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## YELNATS (15 May 2007)

explod said:


> I am 61 years and have had a SMSF set up for 8 years.   A third of the fund is in shares which I actively trade on the market myself.   I take an allocated pension so have cut out capital gains.  It is a wonderful shelter and anyone near to or 60 plus ought to set up thier own fund and put in as much as they can afford before 30 June.  I got rid of property to do it and I believe investments in resources will outdo property in the forseeable future anyway.     I just recieved a book via the Forums bookshop "The Self Funded Superannuation Fund Handbook" which is invaluable if you are going that way.
> 
> cheers to all and happy trading and retirement combined




G'day, similar to yourself I have just turned 60 and have had a SMSF for 5 years. After July 1, I am splitting the fund into an allocated pension 90-95% and the remainder 5-10% to stay in super. As I understand it, the beauty is that earnings (capital gains, dividends & interest) are tax free while earned in the pension component. You cannot add any contributions to the pension component, but you can add contributions to the super component, hence that is why you retain this component for this flexibility. Also, you have to withdraw at least 4% of the pension component annually, naturally at zero tax.

Of course, I would like to continue purchase and trade shares etc. within the pension component.

I'm not sure if you can readily and freely transfer further amounts from the super to the pension component at any time in the future.

If I've got any of this wrong, could anyone please correct me. 

regards YN.


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## yonnie (15 May 2007)

I`m 57 now, but as I understand it I have to retire and take an allocated pension as soon as the SMSF is set up to stop the SMSF from paying any tax.

Is that right?

Also I can`t be a share trader in my own right anymore
I would assume, because then I`m not retired.

It also means I can`t have ANY income from employment?

thanks


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## explod (15 May 2007)

yonnie said:


> I`m 57 now, but as I understand it I have to retire and take an allocated pension as soon as the SMSF is set up to stop the SMSF from paying any tax.
> 
> Is that right?
> 
> ...




As luck would have it I will be discussing these issues with my advisor tomorrow.  I believe as a trustee you may do anything to enhance your super by active proper investment within the meaning of the Act., and that includes as I understand it, actively trading a component within the fund.   I beleive that you may take a transitional pension from the fund whilst working and still enjoy the benefits of no capital gains tax on the share trading, there are pro-rata fumulas for this.   There has been no warning to me that I cannot trade within the fund as I have been doing for that past four years. Will get back to you after my meeting


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## Julia (15 May 2007)

explod said:


> As luck would have it I will be discussing these issues with my advisor tomorrow.  I believe as a trustee you may do anything to enhance your super by active proper investment within the meaning of the Act., and that includes as I understand it, actively trading a component within the fund.   I beleive that you may take a transitional pension from the fund whilst working and still enjoy the benefits of no capital gains tax on the share trading, there are pro-rata fumulas for this.   There has been no warning to me that I cannot trade within the fund as I have been doing for that past four years. Will get back to you after my meeting




Thanks.  Look forward to the answers, and thanks to you too Adam, for your info. 
I'm interested in the comparative benefits of continuing the fund in its existing form (accumulation ) but just pulling out lump sums as required to supplement other income versus having an allocated pension once retirement age is reached.  

When you say that no tax is paid within an allocated pension, does this mean if e.g. the allocated pension is derived from a portfolio of shares which have capital gains plus they all earn dividends, no tax is paid on any of that?
Or does it just mean that no personal income tax is paid on the allocated pension?

With thanks

Julia


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## Prospector (16 May 2007)

Julia said:


> Thanks.  Look forward to the answers, and thanks to you too Adam, for your info.
> I'm interested in the comparative benefits of continuing the fund in its existing form (accumulation ) but just pulling out lump sums as required to supplement other income versus having an allocated pension once retirement age is reached.
> 
> When you say that no tax is paid within an allocated pension, does this mean if e.g. the allocated pension is derived from a portfolio of shares which have capital gains plus they all earn dividends, no tax is paid on any of that?
> ...




Or does it mean that once you turn 60 there may be no further need of allocated pensions; you can just withdraw money as you need it; and anything that the funds earn (CG, interest etc)  is tax free, and anything that goes out to the individual is tax free.  The allocated pensions may therefore only be of benefit when someone is aged 55+ (current preservation age to those born before hm, 1960?) when you are working, want to salary sacrifice to super  but can use an allocated pension to make up the difference, so by drawing a pension you change the fund status from accumulation to draw down phase, in which case no more CGT for the Super Fund, and the individual has reduced their personal tax through Salary sacrificing into Super?

Oh, too many words for so early in the morning.......


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## explod (16 May 2007)

Prospector said:


> Or does it mean that once you turn 60 there may be no further need of allocated pensions; you can just withdraw money as you need it; and anything that the funds earn (CG, interest etc)  is tax free, and anything that goes out to the individual is tax free.  The allocated pensions may therefore only be of benefit when someone is aged 55+ (current preservation age to those born before hm, 1960?) when you are working, want to salary sacrifice to super  but can use an allocated pension to make up the difference, so by drawing a pension you change the fund status from accumulation to draw down phase, in which case no more CGT for the Super Fund, and the individual has reduced their personal tax through Salary sacrificing into Super?
> 
> Oh, too many words for so early in the morning.......





As I am to understand I think what you are concluding is correct.

And an apology,  my appointment with my financial adviser is Thursday, not today as I said last night


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## yonnie (16 May 2007)

thanks explod......good to take some issues from here to your advisor so that we all learn from that and you can pay the bill

are there not any simple SMSF books on the market with all the latest changes?
I read some older books and there is a lot of droning on to fill up the pages but at the end of the book I`m even more confused..........


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## explod (16 May 2007)

yonnie said:


> thanks explod......good to take some issues from here to your advisor so that we all learn from that and you can pay the bill
> 
> are there not any simple SMSF books on the market with all the latest changes?
> I read some older books and there is a lot of droning on to fill up the pages but at the end of the book I`m even more confused..........




Go back to one of my posts here yesterday where I recommended such a book which is available within the Forums Bookshop


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## grumpee boi (16 May 2007)

If you do not take a pension then it is in accumulation phase and there will be tax on earnings and cgt.


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## Happy (16 May 2007)

grumpee boi said:


> If you do not take a pension then it is in accumulation phase and there will be tax on earnings and cgt.





Is pension set to run the funds dry?

Another question if I may, can pension be paid back into super account if not used up?


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## Prospector (16 May 2007)

Happy, I would think that if you take money out as pension, then put it back in again, these would be undeducted contributions.  You would probably only worry about doing this if you were aged between 55 and 60 and wanted to change the SMSF from being in the accumulation phase to the er, pension phase  or whatever it is called. (so no CGT on realised gains) Once you got to 60, then you would just keep the money in the SMSF until you needed it   or maybe there are other reasons why you might take out and put back after 60.


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## explod (16 May 2007)

Happy said:


> Is pension set to run the funds dry?
> 
> Another question if I may, can pension be paid back into super account if not used up?





The idea as a trustee is to grow the fund continually so that the funds do not run out and the reason why I actively handle it all myself


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## grumpee boi (16 May 2007)

Happy,

If you take out the maximum payments your pension will run out at age 80 if it earns 10% pa and the income stream is not indexed.  Most people would want to index their income and so it is likely that it would run out before age 80.  earn less than 10% pa and it will run out even earlier.  (the figure is 83 if the pension started in 2006 due to a change in the pension valuation factors)

Life expectancy used to be around the 80 mark hence when they calculated the pension valuation factors (PVF), and in this case the MAXIMUM they did so with the intention that the pension would run out at 80.  why they did not allow for an indexing of the income I have no idea.

It is for this reason that most people will not take out the maximum and if you can get by on the minimum then even better.  Furthermore, this potential to run out of money before dying leads conservative types to go for the more conservative complying income streams such as lifetime annuities where you "buy" your guaranteed annual income stream with a lump sum at the start.

having said this, the flexibility associated with allocated pensions is what makes the combo of an SMSF with the AP so attractive to the hands-on types confident in their investment ability (or of their adviser).

Recontributing does in fact increase the undeducted contributions and the drawdown-recontributions strategy has been very popular for this reason.  

Adam


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## Happy (16 May 2007)

grumpee boi said:


> Recontributing does in fact increase the undeducted contributions and the drawdown-recontributions strategy has been very popular for this reason.




Thank you all for info.

I am bit bacwards with understanding Sper language.
Now I noticed that language will change again after 1 July.

Undeducted contribution - what does it mean? And what does it do to tax liability when put to super, when in super and later when pulled out?


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## yonnie (16 May 2007)

explod said:


> Go back to one of my posts here yesterday where I recommended such a book which is available within the Forums Bookshop




yes explod (is that short for exploding and you need anger management? ) I saw you bought it, but not sure you recommended it.

so now you understand everything and actually dont need to see your advisor?


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## explod (16 May 2007)

yonnie said:


> yes explod (is that short for exploding and you need anger management? ) I saw you bought it, but not sure you recommended it.
> 
> so now you understand everything and actually dont need to see your advisor?




Thanks for pulling me up yonnie, guidance takes us forward and lively discussion can reassure, but not being licensed to do so makes me a bit cautious about handing out direct recommendations.   Anger management, well we may need lots of that as time goes by


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## trueblue (16 May 2007)

explod said:


> I am 61 years and have had a SMSF set up for 8 years.   A third of the fund is in shares which I actively trade on the market myself.   I take an allocated pension so have cut out capital gains.  It is a wonderful shelter and anyone near to or 60 plus ought to set up thier own fund and put in as much as they can afford before 30 June.  I got rid of property to do it and I believe investments in resources will outdo property in the forseeable future anyway.     I just recieved a book via the Forums bookshop "The Self Funded Superannuation Fund Handbook" which is invaluable if you are going that way.
> 
> cheers to all and happy trading and retirement combined




You sound as if you know what you are doing. How are you managing the other 66.6%. Are you into global shares? Where do you find good interest rate returns for your SMSF. Most Net banking with good rates, aims at private investors. I would like to think I am capable of running my own SMSF but I am unsure. Thanks in advance.


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## Wysiwyg (16 May 2007)

Prospector said:


> I think it is 15% under 12 months and 10% after 12 months?




I googled cgt on superannuation and....

If asset held for less than 12 months it is taxed at a rate of 15%.

If asset held for more than 12 months *the capital gain is discounted at 33.33%.Then the discounted amount is taxed at 15%.*

For example this copy and paste : Income Tax Year 2006/2007 

Type of taxpayer = Complying Super Fund 
Taxable income before capital gain = Not applicable 
Date of purchase of asset = Jan, 2006 
Cost base of asset (unindexed) = $20,000 
Ownership costs and costs incurred at time of sale which are included in the above cost base.* =  $33 
Date of sale or redemption of asset = May, 2007 
Proceeds of sale or redemption of asset = $30,000 

*The ownership cost element cannot be indexed. Indexation is not relevant for costs incurred at the time of sale.  

Indexed   Not applicable Use this Discounted method 
Proceeds of sale  --- $30,000 
Cost base (unindexed)  --- $20,000 
Cost base (indexed)  --- --- 
Discount capital gain  --- $10,000 
Discount (33.33%)  --- $3,333 
Capital gain  --- $6,667 
Tax attributable to gain**  --- $1,000 
Tax rate**  --- 15.00% 
**Excluding Medicare Levy.


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## trueblue (16 May 2007)

Prospector said:


> Or does it mean that once you turn 60 there may be no further need of allocated pensions; you can just withdraw money as you need it; and anything that the funds earn (CG, interest etc)  is tax free, and anything that goes out to the individual is tax free.  The allocated pensions may therefore only be of benefit when someone is aged 55+ (current preservation age to those born before hm, 1960?) when you are working, want to salary sacrifice to super  but can use an allocated pension to make up the difference, so by drawing a pension you change the fund status from accumulation to draw down phase, in which case no more CGT for the Super Fund, and the individual has reduced their personal tax through Salary sacrificing into Super?
> 
> Oh, too many words for so early in the morning.......




This is true but although there is no tax on your allocated pension the amount drawn is added to any income earned on the outside for taxation purposes. If you draw an allocated pension of $30k (tax free) and earn $46k on the outside. You pay tax at 40% on the $46k (Based on the new bracket - 40% is $75 to $150K).I think I have that right. I am no financial advisor, just a gal struggling to succeed.


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## explod (16 May 2007)

trueblue said:


> You sound as if you know what you are doing. How are you managing the other 66.6%. Are you into global shares? Where do you find good interest rate returns for your SMSF. Most Net banking with good rates, aims at private investors. I would like to think I am capable of running my own SMSF but I am unsure. Thanks in advance.




No one has a total answer, I try to do the best I can.  I have 33% tied up in property trusts and 33% in physical bullion, to insure against currency devaluation the rest as indicated in shares.   I wish I could move the property trust but is tied up for a further 3 years.    It yields 10% and the capital gain on the property has been about the same, which is pretty good.   Advisers are worth their weight in gold but only as consultants, never let them take control (from someone who was burnt).   With our dollar appreciating global shares would be suicide at the moment


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## yonnie (17 May 2007)

hey wysiwyg,

so to cut a  long story short CGT in SMSF is charged @
<12 months = 15%.......>12 months holding period = 10%

thanks for your explanation


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## yonnie (17 May 2007)

sooooooooooooooo

anybody read a book on SMSF so damned clear, that no advisor was needed?
come on, tell me!!!!!!!


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## yonnie (17 May 2007)

explod said:


> Thanks for pulling me up yonnie, guidance takes us forward and lively discussion can reassure, but not being licensed to do so makes me a bit cautious about handing out direct recommendations.   Anger management, well we may need lots of that as time goes by




lol, not mellowing out yet explod


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## yonnie (17 May 2007)

Happy said:


> Thank you all for info.
> 
> I am bit bacwards with understanding Sper language.
> Now I noticed that language will change again after 1 July.
> ...




hi happy (hope you are )

undeducted contributions are contributions you dont claim against your other income.

what I understand is that you can deposit funds into your super up to a certain amount depending on your age without paying any tax.

from 55 years of age you can take out an allocated pension and it stops your SMSF from paying any tax from that moment on profits.

Allocated pension must be at least 4% per year of your total balance in your SMSF.

The total balance is in deducted (say 20%) and undeducted contributions (say 80%).

Now your total balance in your SMSF is $ 1 million and you take out an allocated pension of $ 40,000  between 1 July 2007 and 30 June 2008.

The deducted part of that allocated pension is 20% of $ 40,000 = $ 8,000 and you pay 15% tax of that amount.

The undeducted part is 80% of $ 40,000 = $ 32,000 and is tax-free.

See explod, I dont know much about these things and I`m still not scared to "advise" people 

well who`s going to shoot me down on my interpretation?


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## Happy (17 May 2007)

yonnie said:


> hi happy (hope you are )
> 
> The total balance is in deducted (say 20%) and undeducted contributions (say 80%).
> 
> ...





Thanks for that.

How do you come up with 80% / 20% scenario?

Is it your decision at the stage when you decide to draw pension?
Or it all depends on how it was accumulated?


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## YELNATS (17 May 2007)

trueblue said:


> This is true but although there is no tax on your allocated pension the amount drawn is added to any income earned on the outside for taxation purposes. If you draw an allocated pension of $30k (tax free) and earn $46k on the outside. You pay tax at 40% on the $46k (Based on the new bracket - 40% is $75 to $150K).I think I have that right. I am no financial advisor, just a gal struggling to succeed.




Hi Trueblue, just to understand it better, based on your example how much total tax would you pay on the $76k? Would it be $17,500 or something else?

Using the new personal income tax table starting 01/07/2007, ie.

0 - 6000    zero tax
6001 - 30000 15%
30001 - 75000 30%
75001 - 150000 40%.

thanks YN.


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## yonnie (17 May 2007)

Happy said:


> Thanks for that.
> 
> How do you come up with 80% / 20% scenario?
> 
> ...




hi happy (well are you?) 

the 80/20 is just an example in that your total super stands at $ 1mil and your contributions over the    year(s) have been 80% undeducted and 20% deducted.

when you are 55 or older YOU decide when to draw a pension and you just write to ATO that you had enough of always contributing and that now is the time to draw some pension and paint the town red


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## Happy (17 May 2007)

Thanks yonnie,

I am happy that super rules will be simplified after 1 July


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## explod (17 May 2007)

yonnie said:


> lol, not mellowing out yet explod




As promised my report on the visit to my advisor. After July 1 I can draw 4% or more, no upper limt from my super  as an allocated pension, tax free.   However if I draw more than 4% as an allocated pension it will effect my wife's aged pension. (she being 7 years older than myself)  However on top of that we can take lump sums whenever we like of any amount that makes no difference and is not taxed.  No that's how it works for us but why it works I do not fully understand or care, just that if I keep growing the shares as now we have found the perpetual money tree.    My answers are for my circumstances so may be not the answers you want.   But I can say that Uncle Peter from Canberra has done this thing very good for us.    

And yonnie, if you will not accept my apology I am pleased to continue the battle.  Oh.. explod actually signifies "redundant" ...so.... I am probably a spent fuse and you win


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## yonnie (17 May 2007)

well everybody seems happy.....

happy is happy and explod is happy 

good to know what your name stands for explod.

my thoughts were exploding or ex-plodder or.........

an ex-plodder for sure now your super has been sorted out.


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## YELNATS (17 May 2007)

YELNATS said:


> Hi Trueblue, just to understand it better, based on your example how much total tax would you pay on the $76k? Would it be $17,500 or something else?
> 
> Using the new personal income tax table starting 01/07/2007, ie.
> 
> ...




G'day again. Further to the above post, I too also saw my tax accountant/advisor today. 

According to him after 01/07/2007 if I draw payments from my allocated pension fund which I am about to set up, there is zero tax payable on the the withdrawn amounts, and also there is zero tax is payable on earnings remaining within the pension fund. In fact you don't even have to declare your pension payments in your annual personal tax return at all to the ATO, they just don't want to know about it.

So, if you're still also earning wages or salary from another source you still have to pay your normal PAYG tax, but this is unaffected by any pension payments you would be receiving.

regards YN.


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## Wysiwyg (17 May 2007)

yonnie said:


> hey wysiwyg,
> 
> so to cut a  long story short CGT in SMSF is charged @
> <12 months = 15%.......>12 months holding period = 10%
> ...





Yes yonnie my man...prospector is right and you are correct arlso.


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## Happy (18 May 2007)

YELNATS said:


> According to him after 01/07/2007 if I draw payments from my allocated pension fund which I am about to set up, there is zero tax payable on the the withdrawn amounts, and also there is zero tax is payable on earnings remaining within the pension fund. In fact you don't even have to declare your pension payments in your annual personal tax return at all to the ATO, they just don't want to know about it.
> 
> So, if you're still also earning wages or salary from another source you still have to pay your normal PAYG tax, but this is unaffected by any pension payments you would be receiving.





So if pension is not reported at all, earned first $6,000 is also tax free ?


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## yonnie (18 May 2007)

so I`m 57, wify 54

so I take an allocated pension to stop the SMSF from paying any tax.

do I really have to retire completely and trade in the SMSF only or can I still be self-employed (share trader) and earn wages?


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## YELNATS (18 May 2007)

Happy said:


> So if pension is not reported at all, earned first $6,000 is also tax free ?




Correct, the first $6k is always tax free for individual earners of wages, salaries, interest, dividends, CGT, etc. ie. the normal individuals tax scale applies.

However, the beautiful reality is that if you can draw enough to live on via your allocated pension and if you do still receive a salary or wage from some employment, you can then 100% salary sacrifice that entire salary/wage into your super fund and pay zero tax as your taxable income is then zero. 

ie. result = zero tax on your pension payments and zero tax on your wages/salary and finally zero tax on entry into your super fund as it's an undeducted contribution.

Another important thing I was told by my accountant/tax advisor yesterday - some of us may have more than one super fund, eg. a retail fund as well as a SMSF. If you do, and you have an entitlement in your retail fund to 
pre-1 July 1983 days, to create the same beneficial entitlement in your SMSF, you need to roll over a token amount, say $1,000, from your retail fund to your SMSF before 30/06/2007. 

regards YN


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## yonnie (20 May 2007)

hey yelnats,

dont you pay tax @ 15% on your salary sacrafice?


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## Julia (20 May 2007)

If you begin an allocated pension and find the minimum withdrawal is more than you need to live on, can you recontribute it to the SMSF, and if so,
what are the tax implications of that?


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## YELNATS (23 May 2007)

yonnie said:


> hey yelnats,
> 
> dont you pay tax @ 15% on your salary sacrafice?




yonnie, I've just had a ruling on that, in my example you would pay the 15% tax on payment into the SMSF as it's a salary sacrifice, ie. it's not an undeducted contribution. sorry YN.


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## YELNATS (29 May 2007)

Julia said:


> If you begin an allocated pension and find the minimum withdrawal is more than you need to live on, can you recontribute it to the SMSF, and if so, what are the tax implications of that?




Julia, I've just had a discussion with my AMP fund advisor and asked him that very question. The answer it appears is twofold:

1. if you need to, you can recontribute excess allocated pension fund drawings to the super fund without paying any additional tax, as tax would have already been paid when the money first entered the super fund, either 

(a). via the salary sacrifice scenario, where 15% tax was payable on entry into the super fund, or

(b). via the undeducted contributions scenario where the applicable rate of PAYG income tax was payable on the money before it entered the super fund, upon which no super tax was payable.

2. if you continued to find that the 4% minimum annual withdrawal from the allocated pension exceeded your needs, you can "roll-over" some of the funds from the allocated pension back into the super fund. Again there are no taxation implications in doing this.

While you can reduce an allocated pension fund by rolling money back into the super fund, you are not able to roll money the other way, ie. from the super fund to the pension fund, once the pension fund is already established. If for some reason you wanted to do this, you would need to to establish a second allocated pension fund, which would be separate and independent of the first fund.

regards YN.


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## Julia (29 May 2007)

Thanks very much Yelnats.  Much appreciated.

Julia


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## legs (12 June 2007)

Can someone tell me if I can withdraw my super balance from a super company, set up a SMSF and buy the block of land beside my house and use it as extra space... not build on..just as Play Area for the kids, probably fence it in (can be a SMSF expense for security of the land)???? Can i also then have SMSF and a normal fund as well? i.e. 2 funds going at once??

Thanks


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## Prospector (12 June 2007)

legs said:


> Can someone tell me if I can withdraw my super balance from a super company, set up a SMSF and buy the block of land beside my house and use it as extra space... not build on..just as Play Area for the kids, probably fence it in (can be a SMSF expense for security of the land)???? Can i also then have SMSF and a normal fund as well? i.e. 2 funds going at once??
> 
> Thanks



OK, this is not advice but my random thoughts about what I would do.
I would need to have set up my SMSF first, or the original super company wont transfer the funds to it, obviously. As part of that process I will need a Trust Deed and an Investment strategy. If both the Deed and the strategy allows for it, I could purchase a block of land.  I think I would be open to audit if I bought a block of land next to my house, even without building on it, and my kids should not set foot on it.  However, if this was allowed, then the SMSF would be required to pay for its share of fencing.  But not the whole cost.  And yes, I can have as many funds as I like, but the fees will eat up my money!

So see an accountant and an Investment adviser before going any further


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## deftfear (13 June 2007)

legs said:


> Can someone tell me if I can withdraw my super balance from a super company, set up a SMSF and buy the block of land beside my house and use it as extra space... not build on..just as Play Area for the kids, probably fence it in (can be a SMSF expense for security of the land)???? Can i also then have SMSF and a normal fund as well? i.e. 2 funds going at once??
> 
> Thanks




Hi legs,
If you were to buy the block of land next door and let your kids use it as a play area, the fund would probably be in breach of the sis act regulations. It is an asset in the fund that is being used to benefit people related to the fund and as such would be classed as an in-house asset. In-house assets are only allowed to account for 5% of the total assets of the fund. You would also have to pay a market rate for use of the land....best way to determine that would be to ask a real estate agent to give you a written valuation. 

If the land was less than 5% of the value of the fund, and you paid a market rate you may be ok. But you may still fail the sole purpose test, that the fund is being run to fund your retirement...not your kids playtime activties.

Certainly get professional advice from your own accountant who will know your circumstances better.


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