Retirement Planning and Income Streams Solutions

Topic 9: Retirement Planning and Income Streams Solutions
Question 1
Some of the issues would be:
• When to retire
• The lifestyle desired
• Amount needed for retirement (retirement income)
• Current levels of assets and liabilities
• How much is still needed to be accumulated to the amount desired
• What sort of income stream is preferable
• Social security eligibility issues
• Where to live – own home, with children in granny flat or retirement village (consider
purchase price of such unit)
• Health issues
• Estate planning
• Accumulation of wealth
• Investment strategy
Question 2
(a) Students Notes that- THIS QUESTION ASSUMES THAT KIM WITHDRAWS
ONLY $ 340,000 as LUMPSUM for both Part A and part B, leaving $110,000 into her
accumulation superannuation account.

Component	Amount	Assessable income	Tax payable
Tax rate 0
Tax free	$102,000 $215,000	0	0
Taxable- threshold	0	0	0
Taxable threshold Total	–	above	$23,000 $340,000	17.00%
$23,000 $23,000	$3,910 $3,910

Tax on Salary

Taxable Income	45000
Tax (19% on the excess over $18,200)	5092
Add Medicare levy (2.0%X Taxable Income) Less Low income tax offset $700 – [(Taxable Income – $37,500) x 5%] Less Low & Middle income tax offset (LMITO) plus 7.5% of income above $37,000 Tax Super withdrawal	900
(LITO)
325
$255
855 $3,910
Net Tax payable	$8,722

(b) Making a Non-Concessional Contribution (undeducted contribution) of $50,000 would
reduce tax if she only withdrew $340,000.
The total superannuation fund is now $500,000 ($450,000 + $50,000).
The new NCC alters the proportions.
Previously, it was:
Tax free $450,000 x 30% = $135,000
Taxable $450,000 x 70% = $ 315, 000
Now:
Tax free = $135,000 + $50,000 => $185,000/$500, 000 = 37. %
Taxable = $315,000/$500,000 = 63 %
If Kim requires $340,000 from her fund the tax will be as follows:

Component	Amount	Assessable income	Tax rate	Tax payable
Tax free	$125,800	0	0	0
Taxable- threshold	$214,200	0	0	0
Taxable – above threshold	Nil	Nil	Nil
Total	$340,000	Nil	Nil

No tax is required to be paid for the first $215,000 of taxable portion (i.e. tax free);
$214,200 < $ 215,000.
The tax on the lump sum has been reduced from $3,910 to Nil by simply making a NCC
contribution.
Question 3
(a)
A pension is an income stream which is payable from superannuation funds. There are a
number of superannuation funds that can provide pensions, eg. a public sector
superannuation fund (such as Commonwealth public servants) and defined benefit
superannuation funds, retail funds etc.
An annuity is similar in many respects to pension except that it is purchased from life
insurance companies. If a person invests in an annuity, he/she enters into a “contract of
insurance” with that company that covers the terms of regular annuity payment.
(b) The main types of income stream products (pension and annuities) are:
• Allocated or Account based pension funds
• Lifetime Annuities
• Fixed income term Annuity.
• Term Allocated Pension
You need to know each of their characteristics and the tax implications
(c) Restrictions:
Allocated or Account based pensions can only be acquired from funds paid from a
superannuation fund. This also has a limit of 1.6 million starting 2017/2018.
Annuities can be purchased by savings or superannuation funds but superannuation must
be withdrawn as a lump sum, so tax maybe payable if aged 57-59. Some exceptions can
apply to this.
Pensions can only be acquired from superannuation funds whereas annuities can only be
acquired from life insurance companies like Challenger Life.
Question 4
(a) The main retirement issues:
• income needs
• capital expenditure needs (car, health, travel)
• health issues
• estate planning
• social security eligibility
• debts outstanding
• preservation of capital
• investment strategy (now that that have likely reached the end of their accumulation
of wealth stage)
• whether to withdraw the fund as lump sum or to roll-over to an income stream
(pension or annuity). They can do that partly or fully. Consider:
-further Non Concessional Contribution into Liam’s fund
-recontribution strategy
(b) There are a number of income stream products available depending on the couple’s
income needs, income from other sources, whether they need lump sum withdrawal
at future dates and their health.
Need to look into the characteristic of each of the income stream products to
determine the suitability for their situations
• Allocated income streams
• Lifetime income streams / Life expectancy income streams
• Fixed income streams
• TAPs
Issues that need to be considered:
• Certainty of income stream
• Access to capital
• Social security implications
• Flexibility in income streams
• Investment security
• Payment of death benefits
(c) Withdrawal of capital
Term certain pensions/annuities: Some or all of the capital can be returned at end of
period as agreed upon at commencement of contract. Generally, no access to
capital during contract
Lifetime and life expectancy pensions/annuities: Generally, no access to capital.
Allocated pensions/annuities: Access to capital can be made at any time
Note: Liam & Lucy are over the age of 60 yrs (i.e. they are both 62yrs) hence if they
withdraw from their super it would be tax free.
Question 5- Income Stream and Rebate calculation
(a)
This question assumes the income stream commenced post 1 July 2007 where the tax-free
portion was the Deductible amount. John takes out minimum payout Minimum balance will
be:
Account Balance X Percentage according to age
$ 370 000 x 2% = $ 7,400
Taxable amount:
Taxable = 49% x $7,400 $3,626.00
Taxable income

+ Other taxable income + Allocated pension =

$19,574.00 $3,626.00 $23,200.00

Gross tax payable (23,200 – 18,200)*.19 = $950.00
– LITO* $700.00
– Less pension rebate ($7,400 x 15%) $1,110.00
+ Add Medicare levy $570.00
Total tax payable $0.00 **
Note: Using 2020/21 tax rates.
*LITO and LMITO is a non-refundable tax offset

• WE OFFER THE BEST CUSTOM PAPER WRITING SERVICES. WE HAVE DONE THIS QUESTION BEFORE, WE CAN ALSO DO IT FOR YOU.
• Assignment status: Already Solved By Our Experts
• (USA, AUS, UK & CA PhD. Writers)
• CLICK HERE TO GET A PROFESSIONAL WRITER TO WORK ON THIS PAPER AND OTHER SIMILAR PAPERS, GET A NON PLAGIARIZED PAPER FROM OUR EXPERTS

QUALITY: 100% ORIGINAL PAPER – NO PLAGIARISM – CUSTOM PAPER

Why Choose Us?

How It Works

• Click on the “Place Your Order” tab at the top menu or “Order Now” icon at the bottom and a new page will appear with an order form to be filled.
• Fill in your paper’s requirements in the “PAPER DETAILS” section.
• Fill in your paper’s academic level, deadline, and the required number of pages from the drop-down menus.
• Click “CREATE ACCOUNT & SIGN IN” to enter your registration details and get an account with us for record-keeping and then, click on “PROCEED TO CHECKOUT” at the bottom of the page.
• From there, the payment sections will show, follow the guided payment process and your order will be available for our writing team to work on it.

About AcademicWritersBay.com

AcademicWritersBay.com is an easy-to-use and reliable service that is ready to assist you with your papers 24/7/ 365days a year. 99% of our customers are happy with their papers. Our team is efficient and will always tackle your essay needs comprehensively assuring you of excellent results. Feel free to ask them anything concerning your essay demands or Order.

AcademicWritersBay.com is a private company that offers academic support and assistance to students at all levels. Our mission is to provide proficient and high quality academic services to our highly esteemed clients. AcademicWritersBay.com is equipped with competent and proficient writers to tackle all types of your academic needs, and provide you with excellent results. Most of our writers are holders of master’s degrees or PhDs, which is an surety of excellent results to our clients. We provide assistance to students all over the world.
We provide high quality term papers, research papers, essays, proposals, theses and many others. At AcademicWritersBay.com, you can be sure of excellent grades in your assignments and final exams.