Saving tax and interest to boost super

Boosting Your Super Balance by Saving Tax and Interest

Read how a couple close to retirement age was able to add an extra $225K to their Super fund over five years – without having to economise, or make any cutbacks whatsoever. In fact, they were able to spend $1K more per year while growing their wealth.

Sound incredible? We assure you it’s possible with the right kind of financial planning.

Overview

Joanne and Simon, both aged 62, were a married couple nearing retirement when they came to House of Wealth for financial planning assistance. They were looking forward to leisure and freedom in their retirement, but were worried their Super balance wasn’t enough to retire.

House of Wealth helped Joanne and Simon achieve their goals with these services:

  • Restructuring finances
  • Tax planning
  • Income improvement
  • Centrelink advice
  • Retirement planning
  • Investment advice

They were planning to retire in five years, at the age of 67. They had a combined Super balance of $555K. They also had a commercial investment property worth $465K, netting an annual rental income of $4K, with a mortgage of $230K.

Simon’s taxable income was $73K a year, and his tax payable was $16K. Joanne’s taxable income was $42K a year, and her tax payable was $5K.

Joanne and Simon’s Financial Goals

When they engaged House of Wealth as their financial planner, the couple’s financial goals were to:

  • Review their current investment strategies.
  • Minimize income tax payable on their current income.
  • Ensure they would be able to draw down $50K of annual tax-free income after retirement.
  • Be able to Access some Centrelink benefits, especially the Senior Concession Health Card

What the House of Wealth Financial Planner Advised

After talking to Joanne and Simon and making a full assessment of their finances, House of Wealth advised the couple to establish a Self-Managed Super Fund (SMSF) for more flexible management of their Super. We had the couple combine their Super balances into one SMSF for easier management and lower fees.

We also advised them to:

  • Transfer the investment property into the Self Managed Super Fund. This would enable them to save 19.5% of income tax on rental income. With the rental income going directly into the Self Managed Super Fund, it would become tax-free.
  • Draw down a lump sum from their Super to pay off the mortgage on the investment property. This move would save approximately $15.5K in future interest payments.
  • Add an extra $10K per year to the Super fund in Simon’s name. This way, Simon could reduce income tax.
  • Adjust their investment portfolio considering that they would retire in five years.

The Results

Joanne and Simon were able to save $15K in tax, interest, and management expenses each year during the five years left until their retirement.

Despite the extra Super contribution, the couple was pleasantly surprised to discover they had $1000 more in cash to spend each year. This enabled them to enjoy some extra luxuries while knowing their savings were growing.

Each year, Joanne and Simon’s Super balance increased by an extra $45K – on top of their previous Super contributions.

When they retired at the age of 67, the couple’s combined Super balance amounted to over $1M, and they were easily able to generate an annual tax-free income of $50K.

Today, Joanne and Simon are a happily retired couple. They enjoy good health and financial freedom as they live out their dreams.

Wondering if there’s a way you can reduce tax or interest payments and have more money to put into your Super fund? To learn more about your options, book a Free Financial Health Check with House of Wealth today. Click here to pick a time and date.

This article is intended as an information source only and to provide general information only. The comments, examples, words and extracts from legislation and other sources in this publication do not constitute legal advice, financial or tax advice and should not be relied upon as such. All readers should seek advice from a professional adviser regarding the application of any of the comments in this article to their particular situation.