This edition is super – or not so super – depending on your position.
We look at the impact of the rate of Superannuation Guarantee increasing to 9.25% from 1 July 2013, as well as the recent announcments by the government on the changes to taxing income streams and the increase in contribution caps.
While death and taxes are unavoidable, we discuss the importance of having a valid will not just for yourself, but for your family.
Why your family should make sure you have a will
“Nothing is certain but death and taxes”
While nobody likes to think about what happens when we die, when it comes to administering a person’s estate what we should be thinking about is what happens when other members of our family pass away.
Having a valid will that is properly constructed and deals with the property of the estate in a clear and effective manner is vitally important to make sure that this difficult period is not made any more stressful than it needs to be. Without a valid or effective will, the remaining family members will have more stress to deal with and may end up losing a large portion of the estate to costs such as legal fees and taxes.
Take this example of the effect of dying without a will: a man died in his 30’s leaving behind a wife and two young children. As he did not have a valid will, the Public Trustee administered the estate. They were legally obliged to following the law and distribute the estate equally between the wife and two children.
As the children were under 18 their share of the estate had to be held in trust until they were 18, which required the sale of the family home to be able to make this happen. As a result, the wife was left with no family home and only one-third of the value of the estate. The money held in trust for the children had to be administered by the Public Trustee and could not be accessed until the children turned 18.
Value Beyond can help you get prepared to make a will by:
- identifying your assets so they can all be properly dealt with
- Mapping out the structure of your ownership of assets, including companies and trusts
- Highlighting the tax effective ways in which your assets can be dealt with
- Get you thinking about the decisions you need to make prior to seeing the lawyer
Read more about how having a will can help you and your family.
From 1 July 2013, the amount of Superannuation Guarantee that employers are required to pay on their employees’ wages and salaries is increasing to 9.25%. This increase will see an additional $250 per year being contributed to superannuation for an employee earning $100,000 per year.
This is a modest increase per employee, however when that increase is across all staff, and the increase then affects also other costs like payroll tax and Workcover, it can quite quickly add up.
Factor in the additional increases over the coming years raising Superannuation Guarantee to 12% and the increases will be quite significant.
- Pricing – adjusting pricing for the further increases over coming years
- Employment contracts – do you have to pay super in addition to the salary, or is it included as part of the total package?
- Budgets – do you need to recalculate your break even, expected profits and cashflow forecasts for the additional contributions?
As an employee, there is also the decision as to how to best invest the extra contributions. While the increase may seem modest, the impact can be quite significant over a 10 to 20 year time frame.
If you are unsure about the impact of these changes, contact Value Beyond to discuss how these changes will affect you.
Changing the way superannuation is taxed
After much discussion and speculation, the government has announced changes to superannuation and the way that it is taxed.
The major changes are:
- Limiting the tax exemption on earnings in a fund that support pensions – currently all earnings are tax free, and this will now be limited to the first $100,000 of earnings, with a 15% tax on the excess.
- The contributions cap will be increased to $35,000 per year for people aged over 60 years of age from 1 July 2013, and over 50 years of age from 1 July 2014.
- Changing the way excess contributions are taxed – they are currently taxed at top marginal rate (46.5%), this will be changed to be taxed at the individual’s marginal rate plus an interest charge.
As this is currently only an announcment, and the budget is just over a month away, there is much detail which is yet to be delivered in relation to these changes.
If you think you will be affected and have any concerns or want to take advantage of the changes, contact us at Value Beyond to discuss.