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Australian Superannuation

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  • Australian Superannuation

    Hi Guys

    Some comments about Australian Superannuation from Noel Whittackers monthly newsletter.

    Now what are we missing by not having compulsory superannuation in NZ?

    Recent changes such as the abolition of both the work test and the surcharge, the ability to access part of your superannuation at age 55 and keep working, and the introduction of term allocated pensions means superannuation is going to play an increasing role in retirement planning. Getting it wrong can be very costly

    ONE - Understand that money placed in superannuation is inaccessible until you retire from the work place after age 55, and up to 60 if you were born after June 1964.
    Therefore, don't place money in this area unless you are prepared not to touch it.

    TWO - The removal of the surcharge means that tax-deductible
    contributions lose no more than 15% in contributions tax on entry into the fund. This is why you should always make your contributions by salary sacrifice if you can. The majority of employees lose at least 31.5% of money that goes into their pay packet-monies salary sacrificed to superannuation lose only 15%. Undeducted contributions have no entry
    or exit tax. If you are in surcharge territory you should try to delay making superannuation contributions until after June 30th but of course you’ll need to take expert advice. It is a choice of paying 48.5% tax on a bonus now or salary sacrificing it to super and losing 27.5% (including surcharge), its obviously better to adopt the second strategy.

    THREE - Don't be too conservative when selecting an investment mix. If you are more than 15 years away from retirement always select a high growth option. This should give the highest returns over time. Also bear in mind that you may live for at least 30 years after you stop work so don't make the mistake of converting all your super fund assets into cash as you near retirement.

    FOUR - Industry funds have been in the headlines and you may have read that some of their advertising has been banned by ASIC. There are many factors to consider when choosing a fund and it is critically important to make sure the superannuation fund you select has a back office that will enable it to offer the services you need. For example, not all funds allow members to make binding nominations or to split their deductible contributions with their spouse. Also, there are some that are hopeless at handling contributions for the purpose of gaining the government co-contribution.

    FIVE - Where possible, pay your life insurance out of your super fund. Often, super funds can obtain insurance at wholesale rates, which enables you to save on insurance premiums, and many of the big funds will let you have a sizable amount of insurance without a medical. Best of all, if you can make your contributions by salary sacrifice, you are effectively getting a tax deduction for your super because its being paid in pre-tax dollars. Life insurance has a cost, and the fact that the premiums are being paid from your superannuation means that less money is now working for you. Certainly, you should have adequate insurance but don't over insure or take out insurance that is not necessary. The question to ask yourself is "how would my family cope if I was killed tomorrow"?

    SIX - Don't let yourself be pushed into starting your own self-managed fund. Yes, they are appropriate for people with large balances who are successful share investors but for most people they are unnecessary, costly and time consuming. The tax office and APRA (Australian Prudential Regulation Authority) are targeting self-managed funds because they are concerned that a large number of trustees simply don't have the skills needed to run a superannuation fund. There are also extremely high
    penalties for non-compliance and the price of getting it wrong could mean that your fund loses its tax concessions. The trustees may be hit with heavy fines too.

    SEVEN - Every super fund charges ongoing fees but it is dangerous to judge a fund on the fees alone. The facilities offered by the fund should be the major consideration. Also avoid unnecessary fees by amalgamating wherever possible all your superannuation under one fund. If you believe that super from previous jobs is unaccounted for go to http://www.unclaimedsuper.com.au/ and see if you can track it down. Recently a family friend told me he was staggered to discover $35,000 worth of super in his name that he had forgotten about.

    Finally treat superannuation as your friend and make the effort to understand it. If you’re not using it to its full extent, you are paying too much tax.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    Hi Muppet

    Yes in NZ we need to follow the Australians with a Superannuation program.

    I'm an aussie so i've seen the benifits to offers the whole country.

    To clarify in NZ we have a superannuation which the way i see it is a government "pension". Australia also has a pension for those over 65 but as well has a superannuation program thats been running for 20+ years.

    Today every employer must contribute 9% of a workers salary into a superanuation fund that cannot be touched till later in life.

    The net result is the country has huge amounts of savings put aside for people. This amount is invested into the stockmarket, property, international investments and to fund new infrastructure in OZ.

    The sooner the NZ government brings in something similiar the less pain for all later on. With the ageing population we all know that Governments around the world are not going to be able to afford to keep so many retirees, so they will be forced to pay their own way. John Howard is already talking about lifting to retirement age to 70 ! I'm sure we will do the same thing.

    We will all need to be taking some responsibility for our own financial future. Living in NZ for the past 18 months i see many of my friends here will be no where near ready to pay for their retirement.

    regards westan
    Invest in the USA for 20% returns. Contact me at [email protected] for details.


    • #3
      I totally agree, Westan.

      We are NZers and have been living in Aust for 6 yrs. My husband took a transfer to Melbourne and has got more in his Super Fund after 6 yrs than my brother-in-law has with a less-geared company super plan in NZ after 30 yrs with the same company.

      This has been one of our main advantages of coming to Australia - although it does make things more difficult for buying IPs back in NZ 'from a distance'.

      We're working on that one!



      • #4

        I recently returned to New Zealand after living in Australia for a few years. During that time I built up my Super fund and will be able to access when i turn 55 (not too far away!).
        Can anyone put me onto any financial advisers or the like that have expertise in managing foreign super schemes - I want to minimise the tax I will have to pay when I finally retire and need some advice on how to do this.




        • #5

          Is that the compulsory super or your own private super fund?

          Marc & I worked in Australia for nearly 6 years and have quite a bit in the compulsory super fund however we have been told we can not have it till we're 65 and that in Australia everyone is asset tested - so we may not see the money at all .

          We definitely weren't allowed to transfer it to a NZ super fund either.


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          • #6
            Hi Donna

            My super is the same as yours - compulsory super all working Aussies contribute to. Any money in your super fund is yours - I think asset testing is carried out to determine if you qualify for the (Aussie) goverment age pension when you reach 65.
            So, if you are in NZ when you hit 65 or whenever you are eligible to receive your aussie pension I think it will be taxed on whatever NZ tax rate you are on at the time - thats why I'm interested in finding out if there are ways to minimise the tax I will be paying on it here in NZ.
            I read today that more than half of Kiwi's have less than $50,000 in savings when they retire - that doesn't give anyone a 'comfortable' retirement by a long shot.
            A survey carried out in Australia indicated that, for a retired couple, a 'basic' lifestyle required (in after tax dollars) $20,155 a year, a modest lifestyle required $23,550 and a 'comfortable' lifestyle required $43,350 a year. Bit frightening isn't it!!

            See http://www.asfa.asn.au/guru/retireme...gets_flyer.pdf


            Last edited by tims; 24-07-2005, 08:32 PM.


            • #7

              How did you get to collect your Super @ 55 yrs?


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              • #8
                Yay! Just found out we can collect at 55yrs too.

                Marc's comment was - "umm that will pay for our champagne" (needless to say we are a wee way off reaching 55yrs and plan to be very comfortably off by the time we reach 55 yrs)


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                • #9
                  Hi all,
                  I realise this is an old post, however I 'm starting to look into how/if/whats required to transfer my Aussie Super back to NZ. I need some advice around this and am not sure even where to start - can anyone give suggestions, who to contact or if anyone been already been through this and how have you gone about it.
                  Many thanks


                  • #10
                    I need to add... I am still a long way off retirement and using my super........I'm wanting to get my head around the transfer and if I can use if in NZ before the OZ retirement age.


                    • #11
                      Best talk to an accountant that specialises in Trans Tasman Tax accounting - they are surprisingly difficult to find and very very expensive I might add.

                      We looked into this a few years back and we never went ahead with the transfer my understanding is that you need to declare that you have left Aus permanently for NZ to get the funds released from Aus to a NZ super fund. That fund will then be held in NZ based on NZ fund rules i.e. date you can access is not bound to Aus rules but I understand the date you access kiwisaver in NZ is not too far different from the age you can access your super if it was still in Aus.

                      There might be a way to get it out of the NZ fund but i'm not aware of one...the sting in the tail (i'm told but need to check this fact) is that if you every return to Aus - after declaring that you are leaving permanently you are required to return the funds to your super. Not sure how they enforce that if you've spent the cash.