Services we offer
What is Superannuation?
It’s restricted as you generally can’t withdraw from super until you retire or reach your preservation age (that’s the intention, although there are special conditions of release.)
And super funds are set up as trust funds. This means a trustee is appointed to manage the fund on behalf, and for the benefit, of its members.
Super receives special tax treatment compared to your other money. When it comes to investing over the long term, there aren’t many better tax-effective ways to save for your retirement.
Lower taxes and more investment options – such as local and international shares, property and fixed interest investments – offer your super more potential to grow.
Why do I need super?
- Our population is ageing rapidly and the aged pension will not be enough.
- Super is compulsory for employees. Superannuation Guarantee (SG) contributions** were introduced to help us take control of our retirement.
- The AMP Superannuation Adequacy Index (June 2009) found that more than 40% of workers – more than four million people – will not have enough money in retirement.
- SG contributions over 40 years will provide you with just over half of your pre-retirement income. Will this be enough? We think you need 65% of your pre-retirement income to retire comfortably. The best place to start is to ask ‘How much do I need?’
- The next step is to use our AMP super simulator to see how you’re tracking and determine what strategies you can use to reach your goals.
** Deposits into a super fund are called contributions.
Advantages of super
Super opens your money to the world of investment markets and you can choose how it is invested.
Money in super is taxed in different ways to your other investments. It’s designed to reward you for investing for the long term.
Super offers competitive insurance. Your insurance premiums, which are part of your super contributions, may be paid from your pre-tax salary, which is a tax-effective way to enjoy the protection you and your family need.
How does my super work?
The most common type of super is an accumulation fund, which is like a managed fund or investment. The main difference is the advantageous tax treatment on contributions and earnings which your money enjoys until you retire.
If you have a lot of assets and have the time, you may want to consider a self-managed super fundto take control of your super.
Making a contribution
Deposits into super are known as ‘contributions’.
There are two types of contributions. They can be made from your:
pre-tax income (concessional contributions) and
post-tax income (non-concessional contributions).
Generally, concessional contributions (made from pre-tax income) attract a contributions tax of 15%, which can be significantly lower than your marginal tax rate. Tax on non-concessional contributions (made from post-tax income) does not apply.
However, there are caps on both these types of contributions which vary depending on your age.
Earnings in super are taxed at up to 15% (and only 10% on capital gains), which is lower than most people’s marginal tax rate. If you start a pension at retirement then the tax on earnings in super reduces to nil.
If you withdraw after age 60 your money is tax free.
You can withdraw your super balance (the benefit) when you reach your preservation age. This varies depending on your birth date. By 2025 everyone will have a preservation age of 60.
There are different tax treatments on lump sum payments depending on the size of the benefit and the age and service period of the member.
Money invested after July 1999 is fully preserved, which means it can’t be accessed until you reach your preservation age.
Super is becoming more flexible with more strategies and ways to reach your retirement goals:
The government’s co-contribution scheme is designed to help low to middle income earners get more into their super.
Concessional contributions can be used to reduce your tax.
A transition to retirement strategy means you can still work full time or part time after your preservation age and still contribute to your super.
Self-managed super funds allow you to take even more control of your super.
More than four out of five Australians insure their car1, yet less than a third of us insure the source and support of our lifestyles – our income.
Income protection cover (also known as salary continuance) pays a monthly benefit of up to 75% of your regular income if you’re unable to work due to sickness or injury, so you can still meet your living expenses.
Total and permanent disablement (TPD)
TPD cover provides a lump sum if you become unable to work due to a permanent disability. This cover can help you pay for medical expenses, repay major debts and help provide for your future.
Trauma cover provides a lump sum if you’re diagnosed with a medical condition or undergo a procedure outlined in your policy. This may include a heart attack, major organ transplant, cancer or stroke — to name a few.
Trauma cover is designed to help cover your medical costs and living expenses, providing you with some financial security during the important recovery period.
Death cover may be important for people of all ages, especially if you have others relying on you and large debts such as a mortgage.
Death cover provides a lump sum to your beneficiaries if you die. This can be used to help meet the costs of your mortgage, other debts and/or cover your family’s future expenses. Many policies make an advance payment of the insured sum if you are diagnosed with a terminal illness.
Business overheads insurance
Business overheads insurance reimburses you for eligible business overheads if you’re unable to work due to sickness or injury. It’s suitable for people, such as small business owners, whose business cash flow is largely generated by their personal efforts.
Transition to Retirement
More than two in five Australians aged 45 years and over who work full time and plan to retire in the future want a phased retirement and more than three in five working Australians aged 45 and over who plan to retire at a certain age are looking to work beyond age 65. The good news is that you can use your super to create an income stream to make the transition, and set a retirement date which suits you.
How can a TtR strategy benefit you?
You may be able to maintain your income and have even more going into your super.
You can reduce your working hours without reducing your after-tax income.
Personal deductible contributions and/or salary sacrifice contributions into super are taxed at 15% versus the individual’s marginal tax rate
In super, investment earnings are taxed at 15% and are tax free when earned in an income stream. In contrast, interest earned on normal savings and investments are taxed at your marginal tax rate.
If you’re aged 55-59, income payments from a pension may be partly tax-free and will attract a 15% tax offset. If you’re over 60, your income payments are tax free.
Investments and Wealth Creation
Five keys to investment success
Before you start investing, it pays to learn the basic principles. The more you know, the better off you’ll be. There are five key principles to investing.
What are the five key investment principles
Start early, invest regularly and reinvest returns.
Set your investment goals.
Diversification – don’t put all your eggs in one basket.
It’s time in the market, not timing the market.
Invest for the long term – the trade-off between risk and return.
1. Start early, invest regularly and reinvest returns
The earlier you start investing, the more chance your investment has to grow through the magic of compound interest – which means you’re earning interest on your interest. Einstein called it ‘The most powerful force in the universe.
Investing the same amount at regular intervals, known as dollar cost averaging, can help take the guess work out of investing as you don’t have to worry about trying to time the market. If the market is falling on the day you buy, you’ll get more units/shares on that day. It’s the opposite when the market rises. This tends to average out the investment price and smooths out market fluctuations.
It also means you don’t risk investing a large amount at the wrong time or waiting too long and missing a rebound in the market.
2. Set your investment goals
You need to have a clear understanding of your investment goals, then select the right investments to achieve them.
You also need a budget to help you assess your current financial situation and how much you can spare.
You can then have this amount automatically deducted from your pay to your investments. It’s the tried and tested way to stick to an investment plan.
Do you want to have all of your eggs in one basket, or a few?
Simply put, diversification is about investing in different markets, so if one goes down, you can minimise the impact by being in a market which goes up. In economics, some markets tend to move counter to each other.
This effectively lowers the risk across your portfolio by spreading the risk. This has a smoothing effect on your investment returns – you generally won’t get the huge gains, but you shouldn’t experience the big losses.
4. Timing the market versus time in the market
Timing the market is when you try to buy when the market is low and sell when it’s high. Anticipating the market’s movements can be extremely difficult.
Giving your investment time in the market allows it to recover from short-term downturns and experience the highs of the market. History shows that while shares may experience negative returns over the short term, returns tend to be higher than cash over the longer term.
5. Invest for the long term – the trade off between risk and return
All investments involve some degree of risk. And generally, when chasing higher returns there is an increased risk of negative returns. How comfortable you are with this will determine the types of investments you should be in. It’s called an investor profile.
You’ll need to strike a comfortable balance between the risk you’re prepared to take and your desired return. As a general rule, the longer the timeframe, the more risk you can afford to take.
You should also remember your strategy depends on your attitude to risk, your financial situation and goals.
Reviewing your will
A will sets out how you want your estate to be managed and distributed after your death. It can also include the appointment of a guardian for your children.
Without a will, management of your estate can be costly, time consuming and distributed according to state based legislation. It’s important to have a valid will and to review it regularly to make sure it is still in line with your intentions.
Do-It-Yourself wills have become more prevalent and are a cheaper alternative to a will prepared by a solicitor. While they may be effective for simple straight-forward estates, they don’t serve more complex estates as effectively1. And a will with even a small flaw may lead to an expensive process if it is contested or it doesn’t have a residue clause which directs how to distribute assets not included in the original will.
Granting enduring power of attorney
If you were to become incapable of handling your affairs, control of your assets could revert to a person appointed by a court.
It would be more useful if you had an enduring power of attorney set up now so that if you cannot manage your affairs, someone you trust and have chosen to act for you, can make the important decisions affecting you and your affairs.
Selecting an executor
An executor distributes your assets after your death. This involves applying to the Supreme Court for probate, which gives them permission to execute your will. It can be a difficult job if your will involves setting up trusts and lodging tax returns and you should ensure they are willing and that you have nominated an alternate as a back-up in case they pass away before you do or change their mind. You should consider appointing your solicitor or using a trustee company.
A guardian can make decisions regarding where you live and your medical care if you lose the capacity to make your own decisions. It’s important to select someone you trust as soon as any signs appear that you may need these decisions made for you.
Considering a family trust
A family trust, also known as a discretionary trust, is a common structure used by small businesses to share the business’ income in the most tax-effective way among beneficiaries within the family group and to protect family assets. It is most useful where the business is generating income and experiencing growth.
It involves setting up a trust with a nominated trustee, who has responsibility for distributing the estate to your nominated beneficiaries. It can also be used to protect assets from dependants’ creditors or if a dependant isn’t capable of managing money.
What happens to my super and insurance when I die?
The death benefit is usually paid to your nominated beneficiaries. The superannuation balance is transferred into the Cash option on notification of your death. The balance will be paid depending on who you have nominated as beneficiaries.
Who can be my beneficiary?
If you are insuring through your superannuation, you need to understand the difference between binding and non-binding beneficiaries and issues to be aware of.
If you have insurance outside of superannuation, you can nominate anyone to be a beneficiary.
Protecting what you have
The best way to look after your family’s future is to ensure you have enough cover.
Fine tune with a professional
Getting the right advice could make a significant difference to how well your estate is managed and distributed after your death and could help to avoid lengthy delays and legal challenges.
Budget and Cash Flow
Developing a budget
The first step in getting your finances in order is to work out exactly how much you earn (your income) and how much you spend (your expenditure). That’s right, you need a budget.
Your income includes:
- Government support eg pension
- bank interest
- rental income
Your expenses include everything you need to spend such as:
- loan repayments
- travel expenses
- school fees
- regular bills eg water, electricity, rates
- child care
- medical expenses
- insurance (car, medical, house)
If you subtract your expenditure from your income you will know whether you are overspending or have some excess money to play with.
Are you out in front or falling behind? Developing a budget will help you gain control of your finances? if you stick to it!
When do I need to budget?
Everyone can benefit from a budget. Regardless of how much you earn, you have to live within your means. And if you have financial goals then a budget may help you reach them.
Preparing a budget can be particularly useful if you are:
- spending more than you should on your credit card
- finding it difficult to save
- saving for a deposit for a home or an investment property, or
- saving to invest.
How do I budget?
You can download AMP’s budget planner or, if you prefer, print off a copy of the budget planner and record your details manually.
This should give you a clearer picture of your finances.
The next step is to identify areas where you can cut back on expenses and save some money.
Don’t be too harsh on yourself and your family. If you set unrealistic savings goals and don’t allow for extras, then chances are you won’t stick to your budget for too long.
Managing your debt
The truth is, whether it’s a mortgage on the family home, a loan for the new car or the school fees, most of us are likely to be in debt at some point during our life.
The trick is to make sure we use debt sensibly, as part of a financial strategy.
The basic approach to managing debt can be broken down into the six steps illustrated below.
- Clarify which debts are good debts and bad debts.
- Determine your current financial position.
- Consider the terms of any loans – which are the most important, expensive and flexible.
- Manage your debt- take steps to reduce your debt.
- Minimise financial risk – protect yourself against the unexpected.
- Review your situation – If it’s still too much, get some professional advice. Talk to a Financial Planner.
By following these steps you could soon be on the road to improving your financial position.
What is good debt?
Good debt is when you borrow to invest and your investment is income producing. This makes the interest you pay on the loan tax deductible. Good debt is also where the investment increases in value after you have invested, for example, a property or shares.
What is bad debt?
Bad debt occurs when you borrow to invest but the value of the investment declines over time. This means the interest on the loan is non-deductible because it is a non-income producing asset, such as a car.
Many of us cannot avoid bad debt, but it is better to try and minimise it whenever possible.
If you need help controlling your debt Tanti Financial Services can help.
Centerlink & Other Government Benefits
Maximise your government benefits
The superannuation and Centrelink systems are both structured to encourage retirees to use income streams. Setting up an income stream with your super can benefit you in two ways:
- It receives a more favourable assessment under Centrelink’s income test, as a portion of the income received is ignored by the income test and,
- Any earnings made by an income stream investment are tax free.
In comparison, any money left in your super will be considered by Centrelink to be earning a deemed rate of return which is used for the Centrelink income test and any earnings in your super fund will be taxed up to 15%.
If you are retired or about to retire, make sure your assets are structured to make the most of government benefits. The right arrangements could boost your age pension entitlement or give you access to some age pension you otherwise wouldn’t have had.
Roger is single, age 65, owns his home, has $180,000 in super and $10,000 in other accounts. He plans to either draw $9,000 as a lump sum from his super or start a super income stream and draw $9,000. Either way, he’ll pay no income tax because he is over 60 – but his age pension entitlement will be different.
For example, by leaving the money in super, Centrelink will deem the first $44,600 of his $180,000 in super to earn 3% and the balance earning 4.5%. Under the Centrelink income test, he’s deemed to be earning $7,431 from his super. As a result, his age pension entitlement for the year is reduced by $1,765 to $17,702
By starting a super income stream with the $180,000 instead, Roger receives a $9,708 annual deduction against his $9,000 pension drawings, making him entitled to an age pension for the year of $19,342. Just by accessing a super income stream, Roger is entitled to $1,640 more in age pension over the year.*
*Using rates and thresholds applicable from 20 September 2011 to 31 December 2011. This example is illustrative only and is not an estimate of the returns or benefits you will receive.
Our Ongoing Service
Investment Strategy Review
- Portfolio Valuation
- Asset Allocation
- Risk Factors
- Investment Opportunities
- Cash Flow Management (Retirees Only)
- Existing Cover
- Levels and Types of Cover
- Risk Management
Tracking of “Lifestyle Dreams”
- Ensure that objectives and “lifestyle dreams”, initially discussed, are being achieved.
- Where we are up to and where are we going?
- Are Centrelink entitlement being maximised and are all details up-to-date?
Estate Planning Review
- Are Wills and Power of Attorney up-to-date?
- Is your debt reducing and are your repayments affordable?
- Priority service and personal contact with Senior Financial Planner
- Dedicated Customer Service Representative
- Next Business Day Response
- Legislation change notifi cations on areas that affect strategies
- Budget Update Emails
- Annual Performance Review Pack
- Ongoing Maintenance of Centrelink Entitlements
- Portfolio Alert as a result of external factors or opportunities
- Invitation to applicable seminars
- Liaison with external specialist with regards to taxation and law.
Any advice in this page is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters.