Age restrictions on superannuation contributions:
A regulated superannuation fund may accept contributions from anyone below age 65 whether or not that person is working. Between ages 65 to 75 you must meet a work test of at least 40 hours work in 30 consecutive days, and above age 75 only compulsory Superannuation Guarantee Contributions may be accepted.

Superannuation withdrawals:
Above age 60 all superannuation withdrawals both pension and lump sum are tax free. Between ages 55 to 60 there is a tax deduction for a component based on your non concessional contributions and a 15% tax offset where the superannuation fund is a tax paying fund. Between these ages a lifetime limit of $140,000 may be withdrawn as a tax free lump sum.

Transition to retirement pensions:
You may begin a superannuation pension from age 55 while still working. The pension must be in the range 4% to 10% of the fund value (lump sum withdrawals are not allowed) and is taxable between ages 55 to 60 with the concessions outlined above and tax free after age 60. You may then salary sacrifice your salary into superannuation to replace the funds used in paying the pension. Concessional superannuation contributions are taxed at 15% so if your marginal tax rate is greater than 15% there are tax benefits in reducing your taxable salary and replacing it with tax free or concessionally taxed superannuation. If operating your own SMSF there is also the benefit that income generated by the underlying asserts paying the pension is tax free.

Superannuation Death Benefits:
A death benefit is tax free to a dependent spouse or children, but the Concessional component of a superannuation death benefit is taxed at 15% in the hands of non dependants (eg adult children). The Concessional component may no longer be withdrawn as a discrete component so where a fund balance includes both Concessional and Non Concessional amounts the only way to avoid this de facto death tax is to withdraw the entire fund balance and re contribute as a non concessional contribution. This is likely to be difficult given the annual contribution limits and age limits.

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Superannuation investments

A Self Managed Superannuation Fund may not borrow but avenues for geared investments now exist through instalment warrants and investment trusts.

Instalment warrants usually relate to shares where an initial deposit is paid with the balance due at some later date. The typical example would have been the Telstra T3 issue where the share price was paid in two instalments. The asset must still meet the requirements of the Superannuation Industry Supervision Act of meeting the sole purpose and in house assets tests, and the fund investment strategy must allow this type of investment.

A Security Trust may be established to gear into property, with the usual restrictions that the property may not be acquired from a fund member or associated person or used by a member or associated person, except where the property is a commercial property used in the Member’s business.

The procedures are:
Establish the Security trust which must have a different Trustee to that of the superannuation fund, The Security Trust borrows the required funds with a non-recourse loan (which limits the lender’s rights to the value of the mortgaged property without any recourse to assets of the superannuation fund). Generally the non-recourse loan will require a higher deposit and carry a higher interest rate as the lender carries a greater risk,
Buy the property in the name of the Security Trust as interim owner until the loan is repaid,
Rental income is derived by the superannuation fund, which makes the loan payments.
The SMSF must have a written investment strategy, must keep written records of major decisions, must adhere to the fund Trust Deed, must hold all assets in the name of the fund, may not borrow or give a charge over any of its assets and must keep all transactions at ‘arms length” from members, trustees and any associated persons.

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