Case study 5

Question 5

Tim (59) and Kat (58) are considering retiring in the next few years. They have some questions for you since you are their adviser.

Tim is employed as a surveyor and earns a salary of $110,000 p.a. + 9.5% Superannuation guarantee charge. He has $800,000 in his superannuation account, with $300,000 in the Tax-Free component and $500,000 in the Taxable component.

Kat is a self-employed freelance journalist and earns $55,000 p.a. She has not made any contributions to her superannuation account since starting her business 2 years ago. From her previous employment, she has a superannuation account which has $350,000 in it, made up of $280,000 Taxable and $70,000 Tax-Free components. Kats superannuation account has a binding death nomination, split 70% to Tim, and 30% to Paul, who is their son and is aged 38.

Required:

1. Calculate the maximum amount that Kat can withdraw from her superannuation account without paying any tax in the year 2021. Show your calculations.

2. Calculate the new tax-free component amount and percentage for Kat after adopting a re-contribution strategy in the year 2021. Your response will relate to your answer in part (a).

3. Unfortunately, Kat has passed away. Calculate the benefit to Kats estate if she had implemented a re-contribution strategy. How much tax will Tim and Paul be required to pay? Ignore any Medicare levy. Show your calculations.