Planning for Retirement Willis Towers Watson, May 2016 Disclaimer - PowerPoint PPT Presentation

Planning for Retirement Willis Towers Watson, May 2016

Disclaimer The information in this presentation is general advice only. It is not personal advice. This presentation is not intended to and should not be taken as a recommendation of any investment options, and it does not take into account your particular objectives, financial circumstances or needs. Before making any investment decisions regarding this information, you should consider your objectives, financial situation and needs. You may also wish to consider obtaining professional advice before making your decision. Towers Watson Australia Pty Ltd (ABN 45 002 415 349, AFSL 229921) 2

Agenda  2016 Budget Update  Superannuation contributions, benefits and tax  Retirement income streams  Centrelink’s Age Pension  Investing in a low return environment  Ceasing employment with Nissan  Nissan Superannuation Plan  Questions 3

2016 Budget Update  The Government indicated the 2016 Budget aims to: – Boost economic and job growth – Get the budget back on track to surplus – Ensure “modernised” and “sustainable” superannuation and taxation systems  The Budget proposals are not yet legislated  The majority of proposals will require legislative amendments and therefore approval from both houses of parliament  Upcoming Federal election may also impact which proposals are ultimately legislated 4

2016 Budget Update – Superannuation Reforms Proposed changes to superannuation contributions: Effective 7:30pm AEST 3 May 2016:  Non-concessional lifetime cap of $500,000 – Takes into account non-concessional contributions made after 1 July 2007 Effective 1 July 2017:  Concessional contribution cap reduced to $25,000 regardless of age  Able to make additional concessional contributions where concessional contribution cap has not been reached in previous five financial years  Individuals up to age 75 able to claim tax deduction for concessional contributions up to the $25,000 cap, regardless of employment arrangement  Additional 15% tax to apply to concessional contributions for individuals with assessable income (plus concessional contributions) in excess of $250,000 per annum (Division 293) – Assessable income threshold for Division 293 currently $300,000 5

2016 Budget Update – Superannuation Reforms Proposed changes to superannuation pensions: Effective 1 July 2017:  The amount individuals can transfer to retirement phase accounts (pensions) capped at $1.6 million  Tax exemption for earnings on assets supporting Transition to Retirement Pensions will be removed and earnings will be taxed at a maximum of 15% 6

2016 Budget Update – Other Measures Effective 1 July 2016:  Upper limit for the middle income tax bracket of 32.5% will increase from $80,000 to $87,000 per annum Effective 1 July 2017:  Low Income Superannuation Tax Offset (LISTO) – Will reduce tax on superannuation contributions for individuals with taxable income less than $37,000 per annum – Refund of tax on concessional contributions up to cap of $500 per annum  Low income spouse contribution tax offset – Income threshold to be increased from $10,800 to $37,000 per annum – Provides tax offset of 18% on after-tax contributions of up to $3,000 made by the contributing spouse (maximum offset of $540 per annum) 7

Superannuation Contributions 2015/16 and 2016/17 Concessional Contribution Cap ─ < 50 years $30,000 ─ > 50 years $35,000 2017/18 Concessional Contribution Cap ─ $25,000 regardless of age  Employer Contributions (accumulation members), Notional Taxed Contributions (defined benefit members) and Voluntary Salary Sacrifice contributions count towards the concessional cap  Excess contributions taxed at your marginal rate plus relevant levies and ATO interest (less 15% tax already paid by the super fund)  Up to 85% of excess contributions may be withdrawn from super  You may use superannuation to pay the excess tax assessment  Excess contributions not withdrawn count towards non-concessional cap  Classified as taxable component 8

Superannuation Contributions  The Superannuation Guarantee (SG) rate will remain at 9.5% until 30 June 2021 and then increase by 0.5% each year until it reaches 12% from 1 July 2025 Effective Date SG % Prior to 30 June 2021 9.5% 1 July 2021 10.0% 1 July 2022 10.5% 1 July 2023 11.0% 1 July 2024 11.5% 1 July 2025 12.0%  Depending on your employer contribution rate or NTC you may have the capacity to make additional voluntary contributions  For example, if your 2015/16 employer contribution/NTC is $8,550 per annum and: – You are < 50 years, capacity to salary sacrifice $21,450 per annum – You are > 50 years, capacity to salary sacrifice $26,450 per annum 9

Superannuation Contributions Notional Taxed Contribution (defined benefit members only)  For members of a defined benefit fund like the Nissan Superannuation Plan, the Plan’s actuary is required to report a Notional Taxed Contribution to the Australian Tax Office  The notional amount counts towards the concessional contribution cap, rather than the company’s actual contributions  Any pre-tax compulsory contributions are included in notional amount  If you require more information on your Notional Taxed Contribution, please contact Marcus Wappet 10

Superannuation Contributions Non-concessional Contributions  $500,000 non-concessional lifetime cap – Includes contributions made on or after 1 July 2007 – Commenced 7:30pm AEST on 3 May 2016 (if legislated)  Invested in accumulation account in accordance with your selected investment strategy  Excess contributions may be withdrawn, earnings taxed  Excess non-concessional contributions that are not withdrawn are taxed at the top marginal rate, plus applicable levies  Classified as tax-free component 11

Superannuation Tax (2015/16 and 2016/17) Accumulation Phase A maximum of 15%, which can be reduced by deductions and other offsets Income such as imputation credits 15% for asset held less than 12 months Capital gains 10% for asset held more than 12 months Pension Phase Income Zero Capital gains Lump Sum Withdrawals Tax-free Tax-free < preservation age Taxable 20% plus relevant levies Tax-free Tax-free Preservation age to age 60 Taxable First $195,000 tax-free, remainder taxed at 15% plus relevant levies Tax-free Tax-free > 60 years Taxable Pensions Tax-free Tax-free Preservation age to age 60 Taxable Marginal tax rate less 15% rebate plus relevant levies Tax-free Tax-free > 60 years Taxable 12

Superannuation Preservation  Preserved benefits cannot be accessed until a condition of release is met: – Leave employment after age 60 – Attain age 65 – Leave employment after preservation age with the intention of permanently retiring Born Preservation age Before 1 July 1960 55 Between 1/7/60 and 30/6/61 56 Between 1/7/61 and 30/6/62 57 Between 1/7/62 and 30/6/63 58 Between 1/7/63 and 30/6/64 59 After 1/7/64 60 – Death, Permanent Incapacity or Terminal Medical Condition – Other approved circumstances (e.g. severe financial hardship or compassionate grounds) 13

Account-Based Pensions  From 1 July 2017, maximum benefit transfer cap of $1.6 million (if legislated)  Taxable and tax-free components are fixed when pension commences  No maximum limit on annual pension payments (except Transition to Retirement Pensions – 10%)  Minimum pension requirements calculated when pension commenced and 1 July each year: Age MinimumAnnual Pension Under 65 years 4% 65 – 74 years 5% 75 – 79 years 6% 80 – 84 years 7% 85 – 89 years 9% 90 – 94 years 11% Over 95 years 14% 14

Transition to Retirement Pensions  Ability to access superannuation prior to full retirement  Pension is non-commutable whilst working  Minimum pension based on age/pension factors  Maximum pension of 10% of July 1 account balance each year  Available for accumulation members of Nissan Superannuation Plan, but not defined benefit members (unless you elect to convert to accumulation)  Taxed as follows: Investment Returns Current From 1 July 2017 (Proposed) Income maximum of 15% Zero 15% for asset held less than 12 months Capital gains 10% for asset held more than 12 months Pensions Tax-free Tax-free Preservation age to age 60 Taxable Marginal tax rate less 15% rebate plus relevant levies Tax-free > 60 years Tax-free Taxable 15

Centrelink Age Pension Eligibility  Men and women born before 1 July 1952 are eligible at 65  For people born after 1 July 1952: Men and women born between Eligible for age pension at 1 July 1952 and 31 December 1953 65.5 years 1 January 1954 and 30 June 1955 66 years 1 July 1955 and 31 December 1956 66.5 years After 31 December 1956 67 years 16