Gustavo has just turned 26 years of age, and would like to retire comfortably on his 62nd birthday. He recently finished his Masters degree in Engineering and is now working as a graduate. His ordinary times earnings are $93,000 plus a $15,000 irregular bonus per year, and this is expected to remain the same indefinitely. Gustavo has analysed the available superannuation funds, which have a long term return of 5% after inflation.

1. Calculate the minimum annual dollar value that his employer needs to contribute into his superannuation fund under the Superannuation Guarantee Scheme and explain the significance of 'ordinary times earnings' with respect to mandatory employer super contributions.

2 Marks

2. Assume that Gustavo wants to contribute up to the legal maximum annual concessional contributions limit. How much of his salary will he need to sacrifice to achieve this?

1 Mark

3. Assume that Gustavo makes the maximum concessional contribution every year until the age of 62. How much money is he expected to accumulate in super by this age? (Use after tax contributions and annualcompounding). At what age and under what conditions can he start withdrawing money out of super?

3 Marks

4. Assume that Gustavo has a life expectancy of 87 years. How much of an annuity should he be able to draw out of his super fund per year in retirement, given the balance you have calculated in part c)? Assume that his money will be in an account based pension earning 5% p.a. compounded monthly after inflation, the balance will be zero upon his death and that there are no limits to super fund balances in the future.

3 Marks

5. Assume that in 2022, Gustavo does not earn any income other than his $108,000 total income, has no deductions or Private Health Insurance.

How much income tax can he save this year by purchasing Private Health Insurance and making the maximum concessional contribution into his super fund, in comparison to not salary sacrificing at all? Show both tax calculations side by side, as well as net income after tax. Note that Superannuation Guarantee Scheme employer contributions are in addition to his $108,000 income. Include the medicare levy and medicare levy surcharge if applicable, and compare his net income after tax achieved across both scenarios .

4 Marks

Please include all marking out and formulas