Question 1

1. What is the objective of the superannuation system? Is it to provide income in retirement to substitute or supplement the Age Pension, or is it part of a three-pillar system of wealth creation designed to alleviate poverty in old age? In your answer, please undertake suitable research to validate your point of view.

2. The Financial System Inquiry (FSI) recommended the use of a comprehensive income product for retirement (CIPR) what is a CIPR

3. How would a CIPR cater for the different financial situations and needs of retirees? In your answer, consider the research undertaken by Professor Deborah Ralston, Week 8 Reading 1 Superannuation in the post-retirement phase: the search for a comprehensive income product for retirement.

4. How could research be undertaken to identify the best retirement product design? Provide examples.

Question 2

From the list of Retirement Income Submissions (Week 8 Reading #4), select any three of the following (you need to summarise at least 6 submissions), and summarise comments:

1. Select two submissions made by individuals with different views and summarise comments (do NOT use the example shown in the summary below Constantinou, Georgia).

2. Select two submissions made by industry associations and summarise comments;

3. Select two submissions made by superannuation funds and summarise comments;

4. Select two submissions made by university/research centres and summarise comments;

Question 3

Nikita has reached her preservation of 58 and has decided to retire. She has $400,000 in her superannuation account; tax-free $40,000, balance from a taxed source. Nikita has heard that if she withdraws $100,000 and re-contributes the funds withdrawn back into her super this could benefit her non-dependent daughter in terms of minimising tax relative to a future death benefit.

1. Explain to Nikita how a re-contribution strategy works.

2. Discuss the tax consequences of Nikita withdrawing $100,000 from her super.

3. Calculate the taxable proportions of Nikitas super when the $100,000 is recontributed.

4. Calculate the potential tax savings for Nikitas non-dependent daughter.

Question 4

Nelson, aged 58, has just retired. He has superannuation totalling $300,000, of which $60,000 is tax free and the balance is paid from taxed funds. Nelson is planning to roll all of his superannuation to an allocated pension and draw 4% as a minimum annual pension payment. Nelson receives $80,400 in other taxable income for the year.

1. Calculate the tax payable, relative to the receipt of his pension payments.

2. If Nelson completes a cash out and re-contribution strategy for $100,000, calculate the tax payable relative to

   1. The cash out, and

   2. On receipt of his pension payments?

3. Should Nelson complete the cash out & re-contribute strategy for $100,000, explain why or why not.

Question 5

Yvonne, 53, and Frank, 56, are married and run a partnership together. They have agreed to sell their business for $3 million, (purchased in 2010 for $1 million) and will retire. Their business is an active asset. Apart from their family home and cars, they have no other assets. Explain the CGT concessions that may be available to them as small business owners; including how much tax they will pay on the $2,000,000 gain made on sale.