Year 1 scenario

Jim is 62 years old and has been a client of yours for many years. Jim earns a salary of $100,000 plus Superannuation Guarantee (SG) contributions. He also salary sacrifices into superannuation such that the combination of his salary sacrifice contributions and his annual SG amount equals his current concessional contributions cap. Jim has accrued a balance of $1.6 million in his accumulation account. Last year Jim's wife Mandy, aged 60, ceased working in order to help look after their grandchildren. Mandy has a small superannuation balance of just $60,000.

Jim is keen to grow his super balance as much as he can so that he can continue to provide support for Mandy and himself when they retire. Jim has recently sold some shares so he now has an extra $200,000 which he would like to use to increase his super balance.

Question 1.1

Based on 2017-18 rates, calculate Jim's annual Sperannuation Guarantee (SG) contribution. Please show your workings.

Question 1.2

Based on 2017-18 rates, calculate Jim's salary sacrifice contribution for the 2017-18 year. Please show your workings.

Question 1.3

Is it possible for Jim to contribute the $200,000 into his super fund as a non-concessional contribution? Explain your anwer.

Question 1.4

As Mandy is no longer working, is she permitted to make any further contributions into her super fund. Please explain your answer.

Question 1.5

Jim's friend has been talking about contributions splitting and Jim has asked you if this issomething that he could do. Discuss with Jim how much of his contributions could be split with his wife Mandy.

Question 1.6

If Jim gave his $200,000 to Mandy, would Mandy be able to contribute the $200,000 to her super fund as a non-concessional contribution?

Explain your answer.

Year 2 scenario

In year 2 when Jim is 63, his father passed away leaving him an inheritance of $300,000.The share market suffered some dramatic losses in June of the previous year and Jim's super account balance fell to $1.3 million as at 30 June of the previous year. Jim is not concerned about the losses as he understands the volatile nature of equities and his investments are still producing dividends.

Question 1.7

Is Jim able to contribute his $300,000inheritance into his super fund? Explain your answer.

Question 1.8

As Jim is now 63 years old, he is considering retirement in about 12 months time and you have been discussing the retirement income stream phase with him.

Explain to Jim how giving the $300,000 from his inheritance to Mandy to contribute to her super fund would enable them, as a couple, to have a higher balance in the retirement income stream phase.

Question 1.9

Why may it bemore beneficial to have as much money invested in the retirement income stream phase as possible compared with leaving it in the accumulation phase?

Question 1.10

If a client already has sufficient cashflow from other investments outside of superannuation, what is a potential downside to transferring money to a retirement phase income stream?