Inside Golf - September 2010

September 2010 www.insidegolf.com.au................................................................................................................................................................ INSIDE YOURPORTFOLIO

37
Ben Hogan’s insurance tip
IanCrotty

BENJAMIN Franklin once said “In this world nothing can be said to be certain, except death and taxes”. Paying taxes occurs all too often, and we’d all like to think death is a long way off. But when you have people dependent upon you — and maybe a big fat home loan as well —there is no escaping the need for adequate life insurance to cover your nearest and dearest in the event you get hit by the proverbial bus.

Once you’ve accepted this reality of modern life, the question arises of how best to line up this insurance so there’s something left over – maybe even for that new set of Callaways you’ve promised yourself.

Life insurance premiums are generally not tax deductible to you as an individual, but if you get a super fund to hold the insurance for you, the premiums are usually tax deductible to the fund — and most will pass on the 15% tax saving back to you. Another benefit can be that your fund might be able to get a better deal – and lower costs — with an insurer that has thousands of members.

Your fund will pay the insurance
premiums out of your contributions or
existing super balance. This saves your
cash for other purposes. But if you don’t
want your super balance being run
down, then you make contributions
to the fund to cover the premiums;
and these contributions can be a tax
deduction for you as well. They need
to be salary sacrifice payments if you’re
an employee, or a Personal Deductible
Contribution if you’re self-employed.

How to get the
government to buy you a
new set of irons

Apart from being Tiger Woods — and getting paid $1.5 million from the Victorian government to turn up and play one tournament — is there any other way?

One of the best superannuation
perks going around is the government’s
co-contribution scheme. Under this
arrangement you can get up to $1,000
each year from the government
by contributing the same amount
voluntarily to your super fund. Let’s
run down the basic conditions for
being able to get a co-contribution
from the government:
• You make a contribution up to
$1,000 to an approved super
fund and don’t claim it as a tax
deduction. In other words, a
voluntary payment - NOT your
employer’s 9% superannuation
guarantee or any other type of
contribution.

• Your total income is less than $61,920. To get the full amount it needs to be higher than $31,920. If it’s in-between, you receive a partial amount. So if you had an income of $46,920 you could contribute $500 and get a $500 matching payment.

• More than 10% of your income comes from employment related sources.

• You are less than 71 at June 30 of the financial year you’re claiming it for.

• You don’t hold a temporary Visa at any stage of the year.

• You’ve lodged a tax return for the year.

Ben Hogan’s near-death experience reminds us that anything can happen at any time

The ATO data matches who qualifies on the income test with data supplied from super funds on who contributed voluntarily and works out automatically who should get a super co-contribution and sends the money to your super fund. Unbelievably they’re quite reliable in doing this!

Now the money is in your fund, how do you get it out to buy a new driver? Well that’s a whole other topic but generally you need to have met a condition to allow you to withdraw super — such as turning 65 or being over 60 and change jobs. I have one retired client who signs up to drive the tennis players’ shuttle cars at the Australian Open every year so that she can earn enough to qualify for a co-contribution.

As she says to me “It’s great, I get more from the co-contribution than I get from working there for two weeks.” She did the work, made her contribution and when the co-contribution came in later on the year made a tax-free withdrawal and treated herself to a new set of irons.

I guess she’s created a new golf saying: “Drive for dough…”;

Ian Crotty is a self-employed financial planner with Australian Unity with 20 years experience in advising people on their finances. An avid golfer, he also claims to be the worst 12-handicapper in Australia. He can be contacted via email at icrotty@ australianunity.com.au, or on (03) 8682 6313.

Disclaimer

Ian Crotty is an authorised representative of Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFS Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. The information in this article is general advice only and it does not take into account the objectives, financial situation or needs of any particular person. Therefore you should seek professional advice before making any investment/financial decisions.

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