Dear Friends,
Changing your sails to suit the wind – part two:
Thank you for your very positive feedback on the first of my three-part series on ‘Changing your sails to suit the wind.’
As per the truism ‘everything old is new again,’ increasing, I find myself recommending the use of Insurance Bonds to a number of our clients. Close readers of Grow may recall my article (written just over nine years ago) in June 2017 here.
Since the introduction of the cap on the amount of superannuation which can be held tax free in retirement phase accounts – presently $2.1m per person (or $4.2m per couple) Insurance Bonds have returned as a viable solution for people with higher retirement balances.
Investment earnings on Insurance Bonds are taxed at a maximum of 30% tax in the fund, but tax free on exit after ten years (or on death). For high income earners, this is a 17.5% tax saving, (including Medicare levy, compared to other non-superannuation investment vehicles. In addition, there is no Death Benefits Tax, so your estate does not have to pay the 17% tax on the taxed components within super.
An Insurance Bond is also a great way for young couples on higher incomes to save for a home deposit, for all of the reasons outlined above. For those who require those features, insurance bonds can provide asset and estate protection, as well as some Centrelink benefits (eg, Funeral Bonds and Insurance Bonds within Bare Trusts).
Therefore, the more the bureaucrats in Canberra tinker, the more options they open up. For a self-described super-nerd like me, the more I enjoy the challenge to find an alternative outcome to the ‘all too regular’ rule changes for my clients. Naturally most couples do not each have $2.1 m in super, but this is a good example of how work-around solutions can be found.
Salary sacrificing to super – beware:
A good employer will treat you well, but many may use the ‘black’ letter of the law to legally rip off their employees when it comes to salary sacrificing contributions to superannuation. Make sure you check whether you are vulnerable.
I was recently quoted in The Age here on this topic.
In a simplified example, say you earn approximately $100,000/pa before tax, and you ask an employer to make an additional $20,000/pa salary sacrifice contribution to your super.
Your employer can then legally not pay the required $12,000 Super Guarantee (SG) contribution, as your salary sacrificed contribution is considered as an employer contribution – which satisfies their SG obligation to you!
The result? You receive $20,000 gross into your super, thanks to the $20,000 salary you sacrificed but none of the SG you expected.
It is clearly not moral, or fair, but it sometimes happens… and it is legal.
I have for years recommended that any salary sacrifice agreement is carefully worded to ensure that this does not happen. Asking a solicitor to approve your salary sacrifice agreement before signing is a very good idea.
NOTE: An unscrupulous employer can also use the lower number, ie, the pay rate after salary sacrifice, to pay entitlements when a redundancy occurs.
To avoid such pitfalls, you can choose NOT to salary sacrifice into super and instead personally contribute the $20,000 into super from your own bank account. You will then need to lodge a Notice of Intent to Claim application with your super fund to claim your contribution as a tax deduction.
Many of you already do that with our assistance!
Family Holiday:
Just a reminder that Julie and I will be taking a six-week break from early October to mid-November. We need a holiday after such an exciting year which has involved one daughter’s beautiful wedding, the other and her husband presenting us with a gorgeous grandson, joining Caveo Partners and welcoming so many wonderful new clients to the ‘Marinis Way.’ It will be business as usual for you all as I have complete trust in the team, and like Douglas MacArthur said, “I shall return!”
A Fond Farewell to Shae:
After six wonderful years with our business, Shae has made the decision to pursue a new opportunity in the healthcare industry.
We would like to sincerely thank Shae for her dedication, professionalism and the positive contribution she has made to our team and our clients over the years. We are grateful for all she has done and wish her every success and happiness in this exciting new chapter.
Please join us in thanking Shae and wishing her all the very best for the future.
Cyber security… again!
I overheard a cyber-security expert use the hackneyed expression “If something sounds too good to be true, it probably is.”
My response: “Bulldust”.
If it sounds too good to be true – it isn’t true.
Get rich slowly and stay rich. That’s the Marinis way, and it works. We recommend cost-effective investing via Index Funds.
We are not interested in get-rich quick schemes. Buy a Powerball ticket – and see how you go. Don’t gamble with your financial future.
Keep an eye on: www.cyber.gov.au/protect-yourself
As always, if I or any of the team can be of assistance, please don’t hesitate to reach out either via (08) 8130 5130 or admin@marinisgroup.com.au
Yours sincerely
Theo Marinis CFP®, B.A., B.Ec., CPA., MCIFAA
Financial Strategist
Authorised Representative
