Now on afternoon. All things financed with Blake were from Pretzel Wealth.
Organize your free consultation at pretzelwealth dot com dot au. Yes, Blake is here one three one eight seven three zero four six zero eight seven three eight seven three. He'll talk about anything you like relating to personal wealth finance.
How are you mate, good mate?
Good?
Yourself well? And a financial year you'd be pretty.
Busy, pretty busy just trying to get contributions into super and move money's around. So it's an exciting time. It certainly keeps me up at night, but it's all good fun.
Yes, I think with the the unexpected, it's fair to say in some quarters speculation about interest rates going down, we'd have a lot of self funded retirees thinking hmm, do I move my money around?
Certainly, and you know some of the minutes that have come out from the RBA that there's question marks around Okay, what you know if tariffs from the US come back online, what does that mean for us? And the market is starting to talk about potentially a July rate cut again, so it's interesting to see some of that commentary. We'll no closer to the date, of course, what's happening there.
But this is the.
Theme now, bill It's interest rates are coming down. How quickly well, time will tell. But as they come down, that's great for mortgage holders. Not so great if you're a retiree with cash sitting in the bank.
I've got three kids with mortgages. They know all about if they're in their thirties. They're trying to pay it down and doing a pretty good job. They're disciplined about it. But hey, if you're a self under retiree with a short term deposit, and those sort of things are important. Leaving super aside for a moment, but there's all those factors too.
Certainly, you know you're now starting to think, Okay, do I leave my money in the high interest savings account?
Do I leave it in cash sitting there?
Yes, you might be getting a better interest rate than locking it up for twelve months, but maybe the term deposit or locking it up for a longer period of times the way to go, especially if we're thinking, well,
there's going to be a few more rate cuts. So you know, whilst the average i'd say twelve month term deposits sitting at about four percent, that's lower than what you can get in a high entret savings account, high indret savings accounts a sort of sitting around that four and a half to four point seventy five percent on average. Some are giving you bonus rates in the five still, but certainly this is on people's minds. They're saying, well, what do we do now? And this is the conversation
we're having. As COVID was kicking on when they started cutting rates quite aggressively, cash was effectively paying you nothing back then, and so alternatives had to be considered. Push people into the stock market, had to get money's invested. And I think that's where it's going to go again.
And if so, for how long?
That's the other thing pretend to be quest that's a piece of string question obviously when it comes to the economy. It's twenty to two calls, some text coming in already, mate, which is great. Thank you for not leaving it to the last minute, because we can't accommodate you if you do so, we really appreciate it. Brian, well done, you're first in the queue. How can Blake help?
Yes, good afternoon. Every year I put the maximum amount of concessional contribution into my super whereby the super my superpund takes out fifteen percent of that and gives it to the government as tax at the time of my death. If it's the person who gets my inheritance from my super is not my spouse, it is my children, they are potentially able to be charged by the government fifteen
to seventeen percent tax on that inheritance. What I want to know is, therefore I have what they call a taxable component in my superannuation fund, in my accumulation fund. How why do I have to pay additional Will my children need to pay additional tax on that? Why is it called a taxable component? And how can I not be in that position?
Okay, So this all comes back to how super was created and the treatment of tax under certain circumstances.
So you're quite right.
If you pass away and your super goes to your spouse, no tax on that on that amount. But if it goes to adult children, your taxable component will be taxed fifteen percent if it goes to them via the will or the estate. If you transfer the or the superinnuation ends up going to the children directly, So you nominate the children as beneficiaries on your superfund. Then there is a fifteen percent rate of tax plus medicare because obviously medicare is important, so they slap on a two.
Percent medicare charge on that. Getting around that, there's two ways.
One is, if you're young enough, so under the age of seventy five, you could consider a recontribution strategy, also subject to I suppose you're toe superbalance. If you're less than one point nine million dollars at the moment, you can do these recontribution strategies. Moneys would come out of Super. Monies would then go back into Super subject to contribution limits, so you can effectively get in one hundred and twenty thousand or three hundred and sixty thousand back into Super.
So essentially money's out, money's in. If you're mindful that maybe there's not so much time left, you could withdraw Super in its entirety. So if you can pull the total balance out of Super, then that will negate any death taxes applicable to superannuation.
So two options.
The second option really is a bit tricky because we don't know what time we've got left, and it's very difficult to sort of try to pinpoint that. So option one's the preferred option. Get some advice around this. Moneys need to leave super go back in, and when they go back in, it enters the tax free component. And when you pass away, it doesn't matter who gets the super If a component of that superinnuation is tax free, there's no tax applicable to that.
So, yeah, you quite make it. Make a good point Bright.
Not too many people are aware of this death tax that sits there in super. Fifteen percent tax has been paid in. It's in a concessional environment. You're able to start income streams later on in life through retirement and enjoy the benefits of potentially having it all tax free. But the government certainly wants to take their share at the.
End with my superfund handle that reconstitute reconstitution amount? Would they do that or would I have to pay a financial advisor to do that?
They can help you.
They would have financial advisors that can assist with that strategy. You may have to pay for the advice from the superfund, but I would always encourage getting some advice around that, because you don't want to sort of pull too much out of super can't get it back in, and so have a chat with the super fund. They may be able to point you in the right direction, but they may end up saying, look, go speak to one of our advisors and there may be a charge for that.
Okay, very hellful, Thank you, Blake.
Thanks Brian, good luck, Brian.
I think we'll probably you've probably answered a lot of this next one on the text line, Blake, but it might be slightly different, so I'll ask it anyway. This is from Robin who says I have a super account where I have nominated my two sons as fifty percent each beneficiaries. I understand they would need to pay tax at their current tax rate once the funds were distributed to them. However, if it was paid to my estate instead, are they still liable for tax?
So the simple answer is yes, they would be liable for tax irrespective, but it's not at their marginal tax rates. It's at a captu rate of fifteen percent. However, if it goes the goes to your sons directly, there's a fifteen percent rate of tax plus two percent medicare levy. So it's terribly important Whilst you can to try to clean up the death tax, of course we need to have access to super so generally speaking, over the age of sixty. If you've met a conditioner of release, you
can access SUPER. All be sixty five years of age and still working, that's fine, but you have to do this before turning seventy five, So terribly important to get this right and get this completed in time, Otherwise there might be.
Some taxes paid in it.
At the end of the day, it just means less money going to kids or whoever you're intending, whoever you're intending to have the money's go to.
We've got Mark on the line with another question for you. A lot of SUPER questions today, which is understandable, I suppose for all the talk around from the federal government.
Good a Mark, Yeah, good afternoon, Thanks for taking my call. I've just got a question in relation to a self managed superannuation fund that I've got set up, which I've got with two other family members or all trustees. Next year, when we meet a condition to release and move it from accumulation into pension phase. We have a property within
the fund. If we were to sell that property next year when it's moved into pension phase, is a capital gains tax free with im mediate effect, or is there like a waiting period before it becomes capital gains tax free once the property involved.
So there's a few things here.
So one, you've mentioned that there's other family members involved in the super fund, So generally speaking, all members would need to be in pension phase in order to sell the asset tax free. There may be a path for segregating assets, but often is the case that that's a little bit too tricky to pull off. But generally speaking, all members should be in pension phase if you're trying to sell it capital gains tax free. The second one
is just around the timing. So what we want to do is, if we're not segregating the assets inside the self managed super fund, we want to be in pension phase for the full financial year, so that means from one July right through to thirty to June. We want to be in pension phase through that period because it means that one hundred percent of the time, one hundred percent of the assets are in pension phase. So that
way you're selling the asset completely takes free. If, for example, you were to go into pension phase on the first of January, well only half of that time that's elapsed throughout that financial year has been in pension phase and so only half of the game will be wiped essentially, so there still could be some capital gains.
So two things to keep.
In mind, Mark, One is all members need to be in pension phase and the second one is all members need to be in pension phase for the full financial year, so just be cautious of that. Speak to your accountant or the self many superfund administrator. They'll be able to guide you as to what the possible outcomes will look like. But it's a very common strategy. You've got money in super you've got an asset a house potentially in soup. Your wait until getting to retirement phase to then sell
that asset. Capital gains tax free, so it's a good good move on that side.
Okay, So essentially you've got to hang on to it when you're in pension phase for a good twelve months. Aren't all selling that set?
No?
Sorry, sorry, Mark, You can sell that straight away. But what needs to have happened is you're all in pension phase from the start of the financial year, so you don't have to hold onto it for the full twelve months. You could sell at any time. It's mainly around how the members are structured in the superfund that matters more so so that property could be sold. But just make sure you're all in pension phase for the full financial year.
For the full financial year. Okay, great, all right, thank you very.
Much, Matt, Thanks for you col mate.
Good luck with that.
We'll try and rip through some of these questions on the text line Blake, with only a few minutes remaining, I wonder how many people actually understand how unitized superfunds operate, says Michael, for example, incurring capital gains tax for other members cashing out. Does Blake have an opinion on switching to an ETF based superfund?
Ye?
So unitized fund so industry fun Just think of industry funds there you're all in the pool together, so you're sharing tax benefits and tax consequences, I suppose. So something to bear in mind. If you don't like that idea, then consider switching ETF super fund. So there's Vanguard who offer ETFs via surper. Look, you can consider that low cost way of investing funds. Before you do anything, just.
Get some advice around. Is that the right move?
There may be some things that you need to consider. Are you invested correctly? Do they invest on your behalf. Do you have to choose the investment, so just get some advice before moving.
David has a question on the text line, could you advise how long I get to sell my deceased mother's house without playing capital gains taxes?
Exactly?
Is it exactly two years from her death or is it the rest of the financial year plus two full financial years.
Yep, that's a good question. It's two years from the date of death. So if you go beyond two years from the date of death, what ends up happening is the price of the property as it the date of death is the cost base of that property, and so whatever you sell it for beyond that point, there may be some capital gains tax on that portion, not from when a parent or a loved one purchased the property Originally.
Les wants to know, would my children need to pay tax with a funeral plan pay out when I die it's not in.
Super generally tax free funeral plans.
Yes.
Maryland wants to know. Only heard the very end of the beneficiary's entitlement to superinheritance today. Is there some where I can hear this interview again as a podcast? Yes, I think Joel it'll be up pretty soon after the show's finished on the two GB website Maryland, so you can get all that. How do you declare you're in pension age or pension phase? I think they mean with a self managed superfund.
Okay, so this is paperwork, so speak to the administrator. There may be some minutes that need to be signed off on, but you're effectively making a self declaration to yourself because you are the super fund essentially.
And I think we've got just enough time to answer one more question. Tom wants to know working full time employer still put in contributions after I'm seventy five years of age.
Yes, the employer can put in super fund, so as long as it's part of your agreements. You're not sort of a contract or anything like that. You're employed on a full time, part time, casual basis and you're entitled to super Yes, super guarantee comes through.
Okay, Now, don't forget Blake from Pretzel Wealth. We'll be back at this time next week, so make sure if you haven't got any if you haven't been able to get a question in today, you'll get a chance when Michael comes back and we do this segment again next week. Blake, thank you very much for coming in, made all.
The best pleasure. Good to see um there he is. Blake went from pretzel wealth