1. Colin Lewis Head of Strategic Advice Perpetual Private 21 st May 2016 MAKING SUPER WORK FOR YOU ASO Business Skills Expo

2. FUNDAMENTALS

3. Long-term, tax-effective savings arrangement that operates primarily to provide income for retirement WHAT’S SUPER?

4. Accumulation phase Pension phase THE SUPER NEST EGG Pre-retirement – Wealth creation Retirement – Income stream

5. Accumulation phase CONTRIBUTIONS GETTING MONEY IN ‘Non-concessional’ (after-tax) ‘Concessional’ (pre-tax) No tax deduction No contributions tax $180,000 pa / $540,000 over 3 yrs Tax deduction 15% contributions tax $30,000 pa / $35,000 pa aged 50+

6. Accumulation phase Pension phase BENEFITS GETTING MONEY OUT ‘Condition of release’ Lump sum Income stream

7. Accumulation phase Pension phase TAX FROM PRESERVATION AGE Taxed at 3 stages Out: nil / 17% Ongoing: Max. 15% Marginal tax rate with 15% tax offset In: 15% / 30% nil

8. Accumulation phase Pension phase Out: nil Ongoing: Max. 15% In: 15% / 30% nil TAX FROM AGE 60 Taxed at 2 stages

9. Super is NOT an estate asset unless you specifically direct it to your estate TAILOR YOUR SUCCESSION & ESTATE PLANS HOLD RISK INSURANCE POLICIES TAX EFFECTIVELY ACHIEVE STATUTORY ASSET PROTECTION SUPER HAS MANY STRATEGIC BENEFITS Within super, you can:

10. A beneficiary who is a DEPENDANT under SUPER LAW Your LEGAL PERSONAL REPRESENTATIVE (LPR), i.e. generally the executor WHO CAN RECEIVE YOUR SUPER DEATH BENEFIT? AND/OR Spouse, child (any age), financial dependant and interdependent

11. Advise trustee to pay your death benefit to your LPR Make necessary arrangements in your Will AND NO SUPER DEPENDANT / ‘AT RISK’ DEPENDANT / WISH TO NOMINATE SOMEONE ELSE

12. DependantsSuperTax SpouseYes Child < 18Yes Child ≥ 18YesNo* Financial dependantYes InterdependantYes * Unless a financial dependant or interdependent NB. Child death benefit pensions must be commuted to a tax-free lump sum by age 25, unless they are permanently disabled WHO IS A DEPENDANT UNDER TAX LAW? DETERMINES TAX TREATMENT OF DEATH BENEFIT

13. Within super, you can: TAILOR YOUR SUCCESSION & ESTATE PLANS HOLD RISK INSURANCE POLICIES TAX EFFECTIVELY ACHIEVE STATUTORY ASSET PROTECTION SUPER HAS MANY STRATEGIC BENEFITS? CONTINUED BORROW TO ACCELERATE YOUR WEALTH ACCUMULATION Super is a useful multi-faceted wealth creation vehicle

14. THE TREASURER’S VIEW “Super was never designed to be an open-ended vehicle for wealth creation.” Association of Superannuation Funds of Australia conference in Brisbane on 27 November 2015

15. 2016 FEDERAL BUDGET

16. REMEMBER! 16 These measures are merely proposals, are not yet law and we have an upcoming election!!

17. 1.Everyone will be able to contribute to age 75 regardless of their work status  Work test abolished for those aged 65 to 74 2.Increased flexibility to claim a tax deduction for personal contributions (up to age 75)  ‘10% test’ gone 3.Catch-up concessional (pre-tax) contributions allowed 4.Low Income Superannuation Contribution (LISC) extended with Low Income Superannuation Tax Offset (LISTO)  Effectively a refund of contributions tax for those earning up to $37,000 5.Spouse contributions tax offset improved for those earning up to $37,000 THE GOOD NEWS FROM 1 JULY 2017

18. 1.Lifetime non-concessional contributions (NCCs) cap of $500,000 (indexed) introduced THE NOT SO GOOD NEWS – THE BIG ONE!! FROM BUDGET NIGHT

19. Accumulation phase CONTRIBUTIONS GETTING MONEY IN ‘Non-concessional’ (after-tax) No tax deduction No contributions tax $180,000 pa / $540,000 over 3 yrs Lifetime $500,000 (indexed) cap

20. 1.Lifetime non-concessional contributions cap of $500,000 (indexed) introduced  Contributions since 1 July 2007 taken into account  Contributions in excess of this cap before 4 May are unaffected  Additional CGT cap ($1.415 million in 2016-17) for eligible small business owners remains THE NOT SO GOOD NEWS – THE BIG ONE!! FROM BUDGET NIGHT

21. 1.Concessional contributions cap to $25,000 pa (indexed) THE NOT SO GOOD NEWS FROM 1 JULY 2017

22. Accumulation phase CONTRIBUTIONS GETTING MONEY IN ‘Concessional’ (pre-tax) Tax deduction 15% contributions tax $30,000 pa / $35,000 pa aged 50+ $25,000 pa indexed Good news: you’ll be able to carry-forward unused amounts retirees will be able to contribute longer!

23. 1.Concessional contributions cap reduced to $25,000 pa (indexed) 2.Threshold for additional 15% contributions tax lowered to $250,000 THE NOT SO GOOD NEWS FROM 1 JULY 2017

24. Accumulation phase Taxed In: 15% / 30% TAX FROM 1 JULY 2017 If your defined income plus concessional contributions exceed $250,000 in a year, contributions in excess of this amount will be taxed at 30%

25. WHO BENEFITS MOST FROM PRE-TAX SUPER CONTRIBUTIONS - 2016-17 Taxable incomeMarginal tax rate & Medicare levy Contribution taxTax saving on CCs < $20,542 0%15% - LISC0% $20,543 - $37,000 21%15% - LISC21% $37,001 - $87,000 34.5%15%19.5% $87,001 - $180,000 39%15%24% $180,001 - $300,000 49%*15%34% > $300,000 49%*30%19% * Includes 2% Temporary Budget Repair Levy

26. WHO BENEFITS MOST FROM PRE-TAX SUPER CONTRIBUTIONS - FROM 1 JULY 2017 Taxable incomeMarginal tax rate & Medicare levy Contribution taxTax saving on CCs < $20,542 0%15% - LISTO0% $20,543 - $37,000 21%15% - LISTO21% $37,001 - $87,000 34.5%15%19.5% $87,001 - $180,000 39%15%24% $180,001 - $250,000 47%15%32% > $250,000 47%30%17% * Includes 2% Temporary Budget Repair Levy X

27. 1.Concessional contributions cap reduced to $25,000 pa (indexed) 2.Threshold for additional 15% contributions tax lowered to $250,000 3.Lifetime $1.6 million (indexed) balance transfer cap from accumulation phase to pension phase introduced THE NOT SO GOOD NEWS FROM 1 JULY 2017

28. Accumulation phase Pension phase BENEFITS ACCESSING SUPER ‘Condition of release’ Income stream Lifetime $1.6 million (indexed) balance transfer cap Good news – an unlimited amount can remain in accumulation phase

29. 1.Concessional contributions cap reduced to $25,000 pa 2.Threshold for additional 15% contributions tax lowered to $250,000 3.Lifetime $1.6 million balance transfer cap from accumulation phase to pension phase introduced 4.‘Transition to retirement’ pensions taxed as if in accumulation phase THE NOT SO GOOD NEWS FROM 1 JULY 2017

30. Pension phase Taxed Ongoing:nil max. 15% TRANSITION TO RETIREMENT PENSIONS FROM 1 JULY 2017

31. 1.Concessional contributions cap reduced to $25,000 pa 2.Threshold for additional 15% contributions tax lowered to $250,000 3.Lifetime $1.6 million balance transfer cap from accumulation phase to pension phase introduced 4.‘Transition to retirement’ pensions taxed as if in accumulation phase 5.Anti-detriment payments abolished  Effectively means that death taxes are back for non-tax dependants, e.g. adult children THE NOT SO GOOD NEWS FROM 1 JULY 2017

32. 32 No need to rush in!! WHAT ACTION SHOULD I TAKE NOW? HOLD ONTO YOUR HORSES!

33.  If you wish to make non-concessional contributions – check your contribution history from 1 July 2007 and if the $500,000 lifetime cap will be breached, do not make any further contributions!!  Including: »where you’ve triggered the bring-forward rule »contributing as part of a re-contribution strategy  Maximise your concessional contributions in 2015-16 and 2016-17  Especially if you’re earning between $250,000 and $300,000 HOWEVER HAVING SAID THAT …

34.  Transition to retirement pensions  Do nothing right now – still tax exempt in pension phase  From 1 July 2017: »commute back to accumulation phase if you don’t need the income »‘retire’ so pension maintains tax exempt status STRATEGIES TO START CONSIDERING

35.  Consider other structures  Discretionary trusts  Insurance / investment bonds  Annuities  Negative gearing  Deduction 15% (super) vs 49% / 47% (personal)  Small business CGT concessions  Including your practice’s premises STRATEGIES TO START CONSIDERING NON-SUPER

36. Superannuation remains a long-term, tax-effective savings structure!! FINALLY …

37. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing/proposed legislation as at 21 st May 2016. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Colin Lewis is a representative of Perpetual Trustee Company Limited, ABN 42 000 001 007, Australian Financial Services Licence (AFSL) No. 236643. Please go to www.perpetual.com.au if you wish to view our Financial Services Guide.www.perpetual.com.au DISCLAIMER

38. QUESTIONS