If your relationship with your spouse ends, you should be aware of what can happen to the super entitlements.
Our CEO, Jacqui Sherlock, was recently interviewed by Forbes Magazine on how women are set to be the major benefactors of a massive intergenerational wealth transfer now underway in Australia. Women are poised to take charge of a staggering $3.2 trillion over the next decade as the greatest wealth transfer in its history takes place. Jacqui shares why Sherlock Wealth is passionate about getting more women engaged with their finances, growing their wealth and securing their legacy.
In this episode of the Engine Room Podcast, Andrew Rocks is joined by Andrew and Jacqui Sherlock from Sherlock Wealth. They talk about the fifty-year evolution of their family-run financial planning business into a holistic advisory firm focused on delivering personalised service through strategic partnerships and technology while giving back to their community.
In this episode, Scott Charlton from Slipstream Group talks with Jacqui Sherlock of Sherlock Wealth about leadership in professional service firms. They discuss a range of interesting topics, including engaging managers from a non-technical background to the role of CEO and the areas of the business that receive more attention as a consequence of the leader not having a client caseload. Join in for some great insights.
Retirement is a period most people eagerly anticipate. It’s that wonderful stage of life when you can finally unwind and spend your time as you please. You can even spend retirement focusing on the businesses you’ve been planning and have put off for so long.
Retirement is a period most people eagerly anticipate. It’s that wonderful stage of life when you can finally unwind and spend your time as you please. You can even spend retirement focusing on the businesses you’ve been planning and have put off for so long.
Many people assume there is no tax payable on super benefits received after someone passes away, but that’s not always the case.
Ensuring you’ve structured your finances tax-effectively is always a concern, but with new tax rules for super on the horizon, many people with large balances are considering alternative vehicles to save for retirement.
Unsurprisingly, this has sparked a renewed interest in an old favourite – trusts.
Trusts have always been popular in Australia, with the government’s Tax Avoidance Taskforce (Trusts) estimating more than one million were in place in 2022.
Separating ownership using a trust
The popularity of trusts for business, investment and estate planning purposes is due to both their flexibility and inherent benefits, particularly when it comes to managing your tax affairs.
At their heart, trusts are simply a formal relationship where a legal entity holds property or assets on behalf of another legal entity.
This separation means the trustee legally owns the assets, but the beneficiaries of the trust (such as family members) receive the income flowing from the assets.
A common example of a trust structure is a self managed super fund (SMSF), where the fund trustee is the legal owner of the fund’s assets, and the members receive investment returns earned on assets held within the SMSF trust.
Which trust is best?
There are many different types of trusts, with the appropriate structure depending on the financial goals you’re trying to achieve.
For small businesses and families, the most common trust is a discretionary (or family) trust. These vehicles are very flexible and can be used with immediate and extended family members, family companies or even charities.
In a discretionary trust, the trustee has absolute discretion on how both the income and capital of the trust are distributed to various beneficiaries.
This gives the trustee a great deal of flexibility when it comes time to allocate income to family members paying different marginal tax rates.
Advantages of a trust structure
Discretionary trusts offer tax, asset protection, estate planning and property holding benefits.
They can also assist with the accumulation of assets for younger generations within your family and provide opportunities for the discounting of capital gains.
For small businesses and farming operations, a discretionary trust can be used to provide valuable asset protection. If your business goes bankrupt or a beneficiary is divorced, creditors will be unable to access assets or property held within the trust as it is the legal owner of the assets.
Building wealth outside super
With new tax rules for super fund balances over $3 million being introduced, trusts also provide a useful tool to consider for continued wealth accumulation.
Unlike super funds, trusts don’t have annual contribution limits, restrictions on where you can invest or borrowing limits. Money can be added and removed from the trust as necessary, providing significant financial flexibility.
Discretionary trusts can also be used with vulnerable beneficiaries who may make unwise spending decisions. The trustee can decide to provide a spendthrift child or a family member with a gambling addiction regular income, but not large capital sums.
Holding ownership of assets within a trust is useful for estate management, as the assets will not be part of a deceased estate, avoiding the possibility of a Will being challenged.
Trusts aren’t always the solution
Although trust structures provide many benefits, there are also tax issues that need to be considered. For example, any trust income not distributed to beneficiaries is taxed at the top marginal rate.
Distributions to minor children are taxed at higher rates and a trust is unable to allocate tax losses to beneficiaries, so they must remain within the trust and be carried forward.
Trusts can be expensive to set up, administer and dissolve when they are no longer needed and the trustee’s actions are restricted by the terms of the trust deed.
If a family dispute arises, running a trust can become difficult and making changes once it is established isn’t easy.
If you would like to find out more about trusts and whether one is appropriate for your business or family, reach out to our experienced advice team here.
Andrew Sherlock is the Owner & Head of Advice at Sherlock Wealth.
A Sydney-based financial planning firm, Sherlock Wealth has been helping successful families, business owners and individuals with their wealth creation and wealth protection needs for more than two generations.
A Chartered Accountant with a background in funds management, Andrew’s career spans more than 30 years. Andrew was one of the first people in Australia to obtain the Self-Managed Superannuation Specialist accreditation and is one of only a few advisers in Australia to be a Certified Investment Management Analyst. He is a lifetime member of the international MDRT Top of the Table and holds a BA Economics degree from Macquarie University with majors in accounting and finance.
Helping clients achieve their lifestyle goals through smart investing and asset management, wealth structures, and strategic planning are the cornerstones of what Andrew and the team at Sherlock Wealth provide.
Andrew can also be contacted at ask@sherlockwealth.com.
If you’re lucky enough to have received a windfall, perhaps an inheritance or a retrenchment payout, your first decision will be what to do with it.
By Andrew Sherlock, Head of Advice, Sherlock Wealth
If you are wanting to maximise your superannuation contributions, it is important to get this done before the end of the financial year.
What are the best ways to boost your retirement savings?
- Contribute a portion of your before-tax income to your super account. When you make a voluntary personal contribution, you may even be able to claim it as a tax deduction.
- Make a carry-forward contribution. This can be done if you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000. This is a great way to offset your income if you have higher-than-usual earnings in the year.
- Arrange tax-effective contributions through salary sacrifice. The Australian Taxation Office requires these arrangements to be documented prior to commencement, so if this is something you are interested in, ensure you take the time to discuss it with your employer.
- Make non-concessional super contributions. If you have spare cash, have received an inheritance or have additional personal savings but have reached your concessional contributions limit, voluntary non-concessional contributions can be a good solution.
- Downsizer contributions are another option if you’re aged 55 and over and plan to sell your home. You can contribute up to $300,000($600,000 for a couple) from your sale proceeds.
- You can also make a contribution into your low-income spouse’s super account, which could provide you with a tax offset.
What are non-concessional super contributions?
Non-concessional super contributions are payments to your super from your savings or from income you have already paid tax on. These are not taxed when they are received by your super fund. Although you cannot claim a tax deduction for non-concessional contributions, they can be a great way to get money into the lower taxed super system.
How does this reduce my tax bill?
Making extra contributions before the end of the financial year can give your retirement savings a healthy boost, but it also has potential to reduce your tax bill.
- Concessional contributions are taxed at only 15 percent, which for most people is lower than their marginal tax rate. In this case, you benefit by paying less tax compared to receiving the money as normal income.
- If you earn more than $250,000, you may be required to pay additional tax under the Division 293 tax rules.
- Some voluntary personal contributions may also provide a tax deduction, while the investment returns you earn on your super are only taxed at 15 percent.
Watch your annual contribution limit
It’s important to check where you stand with your annual contribution caps. These are the limits on how much you can add to your super account each year. If you exceed them, you will pay extra tax.
- For concessional contributions, the current annual cap is $27,500 and this applies to everyone.
- When it comes to non-concessional contributions, for most people under the age of 75 the annual limit is $110,000. Your personal cap may be different, particularly if you already have a large amount in super, so it’s a good idea to talk to your adviser before contributing.
- There may be an opportunity to bring forward up to three years of your non-concessional caps so you can contribute up to $330,000 before the EOFY.
As always, we’re here to help. If you have any questions or would like to discuss EOFY super strategies or your eligibility to make contributions, please don’t hesitate to reach out to us here.
Andrew Sherlock is the Owner & Head of Advice at Sherlock Wealth.
A Sydney-based financial planning firm, Sherlock Wealth has been helping successful families, business owners and individuals with their wealth creation and wealth protection needs for more than two generations.
A Chartered Accountant with a background in funds management, Andrew’s career spans more than 30 years. Andrew was one of the first people in Australia to obtain the Self-Managed Superannuation Specialist accreditation and is one of only a few advisers in Australia to be a Certified Investment Management Analyst. He is a lifetime member of the international MDRT Top of the Table and holds a BA Economics degree from Macquarie University with majors in accounting and finance.
Helping clients achieve their lifestyle goals through smart investing and asset management, wealth structures, and strategic planning are the cornerstones of what Andrew and the team at Sherlock Wealth provide.
Andrew can also be contacted at ask@sherlockwealth.com.