Super Snapshot August 2014

Clear Vision • August 3, 2014
This month we will expand on our age-based super strategies series by discussing the ‘withdrawal and re-contribution strategy’. This strategy is available for SMSF members who are over 60 and is a particularly useful tool for estate planning.

Cheers
Justin

 
This strategy is best presented as an example however there are some background facts about income streams (pensions) which are important to remember:
  •  Once an income stream commences,  no further contributions can be made unless that income stream is stopped.
  • Furthermore, on the date that the income stream has been commenced, the proportion of taxable and tax free balances is locked in and will not change for the life of that income stream.
  • When you begin to draw down on your income stream, this money coming out of the fund is made up of taxable and tax free components according to the locked in proportions. (e.g. if the Fund has 70% taxable balance, each payment will be made of 70% taxable money).

Worked example:
Terry is 58 and is currently drawing an income stream from her self managed superannuation fund. Terry’s income stream has a taxable percentage of 40%.  In the 2014 financial year, Terry makes a non concessional contribution of $150,000. This non concessional contribution (i.e. post tax contribution) will increase Terry’s tax free balance in the fund, however, this money is not automatically added to the Terry’s income stream as contributions cannot be added once the income stream has commenced.
There are several options available to Terry:

Keep the $150,000 in accumulation mode : this would mean that some of the income of Terry’s Fund will be taxable as it is no longer a 100% pension fund. The Fund would also need to apply for an actuarial certificate to determine the percentage of the fund’s income which is taxable. This strategy may be of advantage depending on Terry’s situation however assuming there is no other benefit for Terry to keep an amount in accumulation mode this is tax the Fund will be paying unnecessarily.

Stop the existing income stream, add the $150,000 contribution and commence a new income stream with the new balance : Terry’s current income stream has a taxable percentage of 40% whereas the $150,000 is 100% tax free money. If the income stream is stopped and the new money added, the new pension which is commenced will have a lower the taxable percentage. This essentially ‘muddies the water;’ as the taxable and tax free components of the pension are diluted. When this new pension commences, the taxable and tax free percentages are re-calculated at date of commencement. All withdrawals from the new pension will be made up of the new taxable to tax free ratio.

Keep the existing income stream and commence a second income stream with the $150,000 : Terry’s current income stream remains as is. The second income stream commenced with the $150,000 will have a 0% taxable percentage. This situation can now be used to Terry’s advantage. Each year Terry must withdraw the minimum pension amount from each of her pensions. Let’s say Terry’s minimum for the 2014 financial year is $10,000 however Terry withdraws $30,000. Terry must meet the minimum withdrawal requirement on both of her pension accounts however Terry has withdrawn $20,000 in excess of the minimum. Terry can now cherry pick which account the excess pension is allocated against:

  1. Because Terry is under 60 years old, her pension withdrawals are taxable in her own name. Terry could choose to allocate the extra $20,000 against her second income stream as this stream has a NIL taxable percentage. Under this scenario, Terry would only pay tax on the taxable portion withdrawn from her first income stream.
  2. Alternatively, if Terry has  minimal taxable income in her own name, she could choose to allocate the extra $20,000 against the her first income stream in order to lower the balance and therefore reduce the tax payable by any adult beneficiaries when she passes away.

Our strategy to run multiple pension streams allows for the most flexibility in terms of pension withdrawal and estate planning. In addition, with the proposed changes to the Centrelink deeming rules in January 2015, pensions commenced prior to 31 December 2014 will be grandfathered under the old deeming rules. If an existing income stream were to be stopped, new money added and then re-commenced this would count as a new pension and therefore be subject to the new deeming rules.

If you have any questions in regards to our pension strategies or would like further to discuss your superannuation options further, please do not hesitate to contact our office on 07 4688 2500.

 

Capital Gains Tax Implications of Subdividing Land in Australia

By Caroline Gillies • June 1, 2025
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Autumn Tax Tips: Make the Most of the Final Weeks Before Year-End

By Caroline Gillies • May 25, 2025
As we step into the final week of autumn and feel winter’s chill approaching, it’s a natural time for reflection—and that includes taking stock of your financial and tax situation. The end of the year is closer than it seems, and a bit of preparation now can make a significant difference come tax season. Here are a few things to consider as the leaves fall: 1. Review Your Income and Deductions This is a good moment to check your income year-to-date and consider whether there are any deductions you can still take advantage of. Charitable donations or investment losses might help reduce your taxable income before year-end. 2. Maximise Super Concessional Contributions If you haven’t yet maxed out your superannuation concessional contributions, there’s still time. Remember unused cap amounts carry forward for 5 years and the 2019-20 unused cap amount will expire 30 June 2025. These contributions not only help secure your future but can also offer tax benefits now. 3. Organise Your Records Autumn’s slower pace is perfect for pulling together receipts, invoices, and financial documents. Getting organised now means less stress later when tax season begins in earnest. 4. Consider Tax-Loss Harvesting If you’ve had investments that underperformed, selling them before the end of the year to offset gains can be a strategic move. Consult with us today to see if this makes sense for you. 5. Plan Ahead Winter may bring holidays and downtime, but it's also a good window to consult with a tax professional. A quick meeting before year-end can reveal savings opportunities or help avoid surprises when you file. So, as the days grow shorter and frost begins to settle in, use this time to bring clarity and warmth to your finances.

Have you Thought About Where Your Business Will Be in 5 Years?

By Caroline Gillies • May 11, 2025
At Clear Vision Accountancy Group, we offer tailored services to support your long-term success—from strategic business planning to high-end tax administration. Whether you're aiming for growth, improved profitability, or a clearer direction, we're here to help you build a plan that gets results. If you're ready to map out the next five years with clarity and confidence, contact us today on (07) 4688 2500. Our 1-Page Business Plan will help you with: 1. Vision & Purpose Where are you headed, and why does it matter? What is the core purpose of your business? In five years, what positive impact will you have made on your customers, team, or community? What do you want your business to be recognised for within your industry? 2. Growth & Scale What does success look like, and how will you achieve it? What revenue, profit, or market position are you targeting? How many clients or customers do you want to serve—and in which markets? Are you planning to expand your offerings or enter new territories? 3. Team & Culture Who is helping you build it—and how? What does your ideal team look like in terms of structure, culture, and capabilities? How will you attract, retain, and develop top talent? What kind of leadership values and workplace environment will you foster? 4. Operations & Systems How will you deliver at scale—efficiently and reliably? What systems and workflows need to be in place to support sustainable growth? Which technologies or platforms will you implement to improve efficiency? How automated or streamlined do you want your business operations to become? 5. Brand & Customer Experience What do customers say about you—and why do they keep coming back? How will clients describe their experience with your business? What kind of reputation or brand presence will you be known for? What sets your business apart from the competition ?  Our Dream it. Plan it. Get it! will help you with: 1. Lifestyle & Personal Goals How does your business support the life you want to live? What level of involvement do you want in the day-to-day operations? What does ideal work-life balance look like for you? What personal or financial goals will your business help you achieve?