If you’ve got more than $1.5 million in superannuation, chances are you’ve been way too generous with the ATO.
And I’m about to tell you the three main traps people fall into and what you can do about them.
I’m a financial planner with more than 20 years’ experience specialising in retirement, so you’re going to want to hear all of this.
No. 1: super death tax. I’ve probably done a tonne of videos on this, so go and watch one of those other videos for more detail.
But this is the one that probably hurts the most because most people never realise that their kids could get slugged with hundreds of thousands of dollars in extra tax when they die.
We’ve all been conditioned to think of super in retirement as being tax-free.
Yes – but not for your adult dependants when you die.
No. 2: if you haven’t retired yet, capital gains tax in your super.
Most people are oblivious to the fact that capital gains tax in most funds is basically paid on an arising basis. They’re paying it as they go, all the time.
But if you’re in a different type of super fund – what we call an individually taxed fund – then it’s a completely different process. You don’t pay capital gains tax as gains arise; you pay it at the end.
In a lot of these individually taxed funds, you can move your money from super to retirement. Any embedded capital gains or existing capital gains can move from super to retirement, with no tax on that at all.
Then, in retirement, you can sell down any assets that have gains without paying any tax. Let’s say you’re 60 and retiring at 65 – you could effectively pay no capital gains tax during those final five years. That’s a massive benefit.
Thirdly, if you’re making contributions and claiming a tax deduction for them, most super funds deduct 15% contributions tax from your concessional contributions at the source.
Again, an individually taxed fund might be your friend because it doesn’t deduct the tax at the source. Instead, it does a calculation at the end of the year, looking at all the income and expenses in your fund, and then deducts 15% of the difference. Effectively, you pay a lot less contributions tax.
If I can get my words right! It really makes a huge difference. You have all of that contribution in the fund until the tax return is done, so you’ve got more money earning money rather than having it deducted at the source.
We’ve also got a Million-Plus Super Cheat Sheet. If you want a copy, put “$1 million+ super” in the subject line and email me at lucian@emuwealth.com, and we’ll send it straight to you.
Please don’t put it in the comments because we’re getting way too many requests for the information. Emailing us makes it easier for us to send it straight back to you.
