Vous êtes sur la page 1sur 69

16 February 2015

Mr P. and Mrs P. Xuereb


10 Holloway Street
BIRKDALE QLD 4159

Dear Paul and Pauline,


Re: Statement of Advice
Thank you for choosing us as your financial advisers. By working together we can help set you on the
path to a financially secure future.
Enclosed is your Statement of Advice, which outlines strategies to assist you in achieving your
lifestyle and financial objectives.
Your Statement of Advice has been prepared based on the information provided by you during our
meeting on November 21, 2014. Please take the time to read this document carefully to ensure that
it reflects the information that we discussed in our meeting.
Shortly, we will be in contact to organise a meeting to discuss our recommendations that will form
the first steps towards helping you achieve peace of mind about your future.
Yours sincerely,

Kristine Spiteri BA(Econ), DipFA/Snr Associate (FINSIA)


Representative of Equipsuper Financial Planning Pty Ltd
AFSL No 455010

Statement of Advice
Mr Paul & Mrs Pauline Xuereb
Date of advice 16 February 2015
Prepared by Kristine Spiteri
Representative of Equip Financial Planning
Equipsuper Financial Planning Pty Ltd (ABN 84 124 491 078)
AFSL 455010
Ph 1800 065 753

Equipsuper Financial Planning Pty Ltd (ABN 84 124 491 078, AFSL 455010) is licensed to provide financial
planning services to retail and wholesale clients. Equipsuper Financial Planning is owned on behalf of
Equipsuper Pty Ltd (ABN 64 006 964 049, AFSL 246383) as the Trustee of the Equipsuper Superannuation Fund
(ABN 33 813 823 017). Equipsuper Financial Planning Pty Ltd is responsible for any advisory services your
financial planner provides.

TABLE OF CONTENTS
Table of contents .................................................................................................................................. 4
Executive Summary............................................................................................................................... 6
Lifestyle and Financial Objectives ......................................................................................................... 6
Strategy Recommendation Summary ................................................................................................... 7
Scope of Advice ..................................................................................................................................... 8
Warnings ............................................................................................................................................... 8
What we know about you ..................................................................................................................... 9
Personal Information ............................................................................................................................ 9
Personal Details .................................................................................................................................... 9
Estate Planning...................................................................................................................................... 9
Personal Superannuation.................................................................................................................... 10
Current Personal Risk Insurance ......................................................................................................... 11
Assets & Liabilities .............................................................................................................................. 11
Risk Profile........................................................................................................................................... 12
Recommendations - Superannuation ................................................................................................. 13
Superannuation Rollovers................................................................................................................... 15
Non-Concessional Contributions ........................................................................................................ 18
Equip Transition to Retirement Pensions (TRPs) ................................................................................ 19
Investment Choice .............................................................................................................................. 21
Recommendations - Estate Planning .................................................................................................. 23
Wills..................................................................................................................................................... 23
Powers of Attorney ............................................................................................................................. 23
Binding Death Nominations ................................................................................................................ 23
Estate Planning- General..................................................................................................................... 23
Alternative and Possible Future Strategies ......................................................................................... 24
Alternative Strategies Considered ...................................................................................................... 24
Possible Future Strategies................................................................................................................... 24
Current Asset Allocation ..................................................................................................................... 26
Proposed Asset Allocation .................................................................................................................. 27
Projected Key Results.......................................................................................................................... 28
Projected Long-term Outcome ........................................................................................................... 28
Replacement of Product Information ................................................................................................. 31
What you will pay and what we will receive ...................................................................................... 34
Disclaimers .......................................................................................................................................... 37
Where to from here? .......................................................................................................................... 39
Relevant Paperwork ............................................................................................................................ 39
Authority to Proceed........................................................................................................................... 40
Financial Modelling ............................................................................................................................. 42
Summary of Assumptions ................................................................................................................... 42
Appendix ............................................................................................................................................. 53
The Investment Asset Classes ............................................................................................................. 53
The Risk/Return Trade Off .................................................................................................................. 54
General Information ........................................................................................................................... 55
Superannuation - Introduction ........................................................................................................... 55
Superannuation Guarantee Contributions (SGC)................................................................................ 55
Salary Sacrifice .................................................................................................................................... 55
Government Co-contribution ............................................................................................................. 56
Non-Concessional Contribution .......................................................................................................... 57
Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 4 of 69

Withdrawal & Re-contribution ........................................................................................................... 57


Taxation of Super Withdrawal ............................................................................................................ 58
Preservation ........................................................................................................................................ 58
Transition to Retirement..................................................................................................................... 59
Salary Sacrifice .................................................................................................................................... 59
Transition to Retirement Pension (TRP) ............................................................................................. 59
Account Based Pension ....................................................................................................................... 60
Age Pension......................................................................................................................................... 62
Centrelink Concession Cards ............................................................................................................... 63
Commonwealth Seniors Health Card .................................................................................................. 63
Pensioner Concession Card (PCC) ....................................................................................................... 64
Health Care Card ................................................................................................................................. 64
Estate Planning.................................................................................................................................... 65
Wills..................................................................................................................................................... 65
Power of Attorney............................................................................................................................... 65
Super Death Benefit Nominations ...................................................................................................... 66
Non-Binding Nominations................................................................................................................... 66
Binding Nominations........................................................................................................................... 66
Regular Review.................................................................................................................................... 66
Estate Planning Super Death Benefits.............................................................................................. 67
Who gets your superannuation when you die?.................................................................................. 67
Few Exceptions ................................................................................................................................... 67
Definition of Dependant under Superannuation Law......................................................................... 67
Pension or Lump Sum? ....................................................................................................................... 68
Taxation of Super Death Benefits ....................................................................................................... 69

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 5 of 69

EXECUTIVE SUMMARY
This Statement of Advice (SoA) is a record of the personal financial advice provided to you and
includes information on the basis on which this advice is given, information about remuneration
including fees, commissions, any other benefits and any interests, relationships or associations
which might influence the making of the advice.
If this advice includes a recommendation to you to acquire a particular financial product (other
than securities) or an offer to issue or arrange the issue of a financial product to you, we will
also provide you with a Product Disclosure Statement (PDS) containing information about the
particular product to help you make an informed decision about that product.
The purpose of this Executive Summary is to provide a snapshot of our advice to you. For more
detailed information you should read the relevant section of this SoA.

Lifestyle and Financial Objectives

Paul and Pauline, you require a review of your existing superannuation investments to
ensure they are appropriate to your needs and they are well positioned to meet your
objectives.

You wish to review your financial situation with a focus on maximising your wealth prior
to retirement and how best to structure your investments throughout your retirement.

You wish to build your wealth within the superannuation environment for retirement
planning purposes.

Paul, you plan to retire at age 60 (21 October 2018).

Pauline, you plan to retire at age 67 (6 April 2017).

You wish to go on holiday in November 2015 at an estimated cost of $15,000. You also
plan to maintain regular overseas and domestic holidays to visit family in the UK and in
Melbourne.

You wish to undertake renovations on your home in November 2015 at a cost of


approximately $5,000.

You wish to retain ongoing cash reserves of at least $50,000 in order to meet any
unexpected large expenditures.

You wish to ensure you have appropriate estate planning strategies in place,
incorporating Wills and Powers of Attorney, and beneficiary nominations for super and
Account Based Pensions.
Please review the advice and make your own judgement or provide the additional details to me
for further analysis.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 6 of 69

Strategy Recommendation Summary

Paul, we recommend you rollover the balance of your Colonial First State
superannuation account to your existing Equip Personal accumulation account at your
earliest convenience.

Paul, we recommend that you change the investment selection within your Equip
Personal accumulation account prior to the recommended rollover so that future
contributions are invested in the Cash option.

Pauline, we recommend that you rollover the balance of your Colonial First State
Pension account into a newly established Equip Transition to Retirement Pension (TRP)
at your earliest convenience.

Pauline, we recommend you salary sacrifice 100% of your income between now and 30
June 2015 (approximately $15,715), and salary sacrifice a total of $20,500 to super in
the 2015-16 financial year. We further recommend you continue to make salary
sacrifice contributions to super until retirement such that your income tax liabilities
each financial year are minimised.

Paul, we recommend you make a personal deductible contribution to your Equip


Personal accumulation account of $9,000 in the current financial year, and $16,000 in
the 2015-16 financial year. We further recommend you continue to make personal
deductible contributions to super until retirement such that your income tax liabilities
each financial year are minimised.

Pauline, we recommend you make a non-concessional contribution of $1,000 p.a. into


superannuation in the current financial year, and each subsequent financial year until
retirement.

Paul, after rolling your Colonial First State account over to your existing Equip account,
we recommend you transfer all but $5,000 of the balance of your Equip accumulation
account into an Equip TRP. We recommend you draw the minimum pension as a
fortnightly income stream to assist in funding your lifestyle.

Pauline, as recommended earlier, we recommend you transfer the balance of your


Colonial First State pension into a newly established Equip TRP at your earliest
convenience. We recommend you also draw the minimum pension as a fortnightly
income stream to assist in funding your lifestyle in the lead up to retirement.

Paul and Pauline, we recommend you each make reversionary beneficiary nominations
within your respective Equip TRPs.

Paul and Pauline, we recommend you invest your Equip TRPs with a time horizons
(bucket) approach in line with your Balanced investor risk profile.

Paul and Pauline, we recommend that your pension payments are drawn from the Cash
investment option. In addition, we recommend reviewing your investment strategy
every year to ensure your asset allocation is in line with your risk profile.

Paul, after commencing your TRP we recommend that you alter the investment
selection within your Equip Personal accumulation account so that the remaining
balance and all future contributions are invested in the Balanced investment option.

Pauline, we recommend you review the investment choice within your QSuper account
to ensure your accumulation assets are invested is in line with your Balanced investor
risk profile.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 7 of 69

Paul and Pauline, we recommend that with the help of your solicitor you establish Wills
to reflect your current financial situation at your earliest convenience, if you have not
already done so.

Paul and Pauline, we recommend that with the assistance of your solicitor you establish
Enduring Powers of Attorney at your earliest convenience, if you have not already done
so.

Pauline, we recommend you put in place a binding death benefit nomination within
your QSuper account, if you have not already done so.

Scope of Advice
This Statement of Advice is limited to:

Superannuation

Retirement Planning

Estate Planning

Social Security

In relation to the above areas we have not provided advice on:

The overall suitability of Pauline's QSuper fund as you did not request a review of this
account and indicated you want to retain this account for receipt of ongoing employer
and personal super contributions. We have made general strategy recommendations
involving superannuation, and also included the balance of this account for financial
modelling purposes. Please note however that as you did not want this fund reviewed,
we cannot comment on its suitability for you.

The treatment of any unused leave entitlements you may have at retirement. For
financial modelling purposes we have assumed all leave entitlements are utilised prior
to retirement (rather than being received as a lump sum payout).

Your CBA shares, which you indicated you want to maintain. This holding has been
incorporated for financial modelling purposes.
Your instructions to us have been to provide limited advice; the following areas will not be
addressed:

Wealth Creation

Gearing

Self-Managed Superannuation

Personal Protection

Warnings
You did not provide a specific expenditure goal that you wish to achieve in retirement. As a
result, for financial modelling purposes we have assumed you maintain living expenses in
retirement of $50,000 p.a., which includes all travel expenditure (assumed to be $15,000 p.a.).
As the financial modelling indicates you should be able to achieve this lifestyle comfortably, we
have conducted further financial modelling to ascertain the highest level of spending you may
be able to achieve throughout retirement. Please note that these financial modelling scenarios
are based on a set of assumptions that may not accurately represent future investment
performance, or unforeseeable changes to Government legislation; however they do provide a
robust general guide.
Please see the Financial Modelling and Projected Key Results sections for more detail on your
projected future financial situation, and the assumptions used in creating these projections.
Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 8 of 69

WHAT WE KNOW ABOUT YOU


The following information supplied by you summarises your current situation. If you believe that
any of this information is incorrect or has been misinterpreted, you should let us know before
proceeding with any recommendations we have made. Any detail not recorded indicates that
the data has not been provided to us or is not relevant to the scope of the advice.

Personal Information
Personal Details

Date of Birth

Paul

Pauline

21 October 1958 (Aged 56)

6 April 1950 (Aged 64)

Postal Address
(if applicable)

10 HOLLOWAY STREET
BIRKDALE, QLD, 4159

Home Phone

07 3207 1510

Home E-mail

squabby@optusnet.com.au

Not Provided

Mobile

0421 331 709

0412 703 474

Preferred Contact

07 3207 1510

Dependants
Paul and Pauline, you have indicated that you do not have any financial dependants.

Employment
Paul

Pauline

Employment Status:

Self-Employed (Sole Proprietor) Part-time

Employer Name:

By the Bay Mowing and


Maintenance

Smart Service Queensland

Job Title:

Gardener

Customer Service Representative

Salary:

$25,000 p.a.

$40,394 p.a.

Expected Retirement Date:

21 October 2018

06 April 2017

Expected Retirement Age:

60

67

Estate Planning
Paul

Pauline

Will Exists?

Not Disclosed

Not Disclosed

Power of Attorney?

Not Disclosed

Not Disclosed

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 9 of 69

Personal Superannuation
Paul
Fund Name

Colonial First State (Accumulation)

Balance

$108,866 (as at 20 Jan 2015)

Nominated beneficiaries

Pauline Xuereb (100%)


Paul

Fund Name

Equip (Accumulation)

Balance

$671,646 (as at 9 Feb 2015)

Nominated beneficiaries

Pauline Xuereb (100%)

Current contribution levels


Employer Contributions

N/A

Salary Sacrifice?

Nil

Non-Concessional Contributions

$1,000 p.a. (for Government Co-contribution)


Pauline

Fund Name

Colonial First State (Transition to Retirement Pension)

Balance

$198,948 (as at 15 Jan 2015)

Nominated beneficiaries

None
Pauline

Fund Name

QSuper

Balance

$30,004 (as per Fact Find)

Nominated beneficiaries

Not Disclosed

Current contribution levels


Employer Contributions

Superannuation Guarantee (assumed to be 9.5% as per current


legislation)

Salary Sacrifice?

Nil

Non-Concessional contributions

Nil

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 10 of 69

Current Personal Risk Insurance


Paul and Pauline, you do not have any personal risk insurance policies.

Assets & Liabilities


Item

Owner

Value

Linked to Debt?

Lifestyle Assets
Primary Residence

Joint

$490,000

No

Household Contents

Joint

$100,000

No

Motor Vehicles

Paul
Pauline

$18,000
$20,000

No

Business Assets

Paul

$15,000

No

Total Lifestyle Assets

$643,000

Investment Assets
Superannuation Investments
Superannuation/Pension Investments
Bank Account
CBA Shares
Total Investment Assets
Total Liabilities*
NET ASSETS

Paul

$780,512

No

Pauline

$228,952

No

Joint

$78,000

No

Pauline

$30,000

No

$1,117,464
($0*)
$1,760,464

*your only financial liability is your credit card (current balance $15,300) which you stated you
use for day-to-day living expenses and repay in full each month, so we have not included this in
your net asset position.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 11 of 69

RISK PROFILE
Your Risk Profile
Your risk profile is a measure of how comfortable you are investing your funds across each of
the asset classes. The combination of these asset classes provides us with an asset allocation
that will be used to determine an appropriate investment strategy for you. There are various
types of risk profiles, differentiated by their overall allocation to income and growth assets.
During our meetings we have discussed your reasons for seeking advice, what sort of returns
you are expecting, how you would like to manage your investments and what your short,
medium and long term goals are, and how you feel about potential capital growth and
investment security. These discussions have assisted us to measure how comfortable you are
with different investment types and investments across different asset classes.
From these discussions and based on the results of your Risk Profile Questionnaire, Pauls risk
profile was identified as Balanced, while Pauline your risk profile was identified as Conservative.
However, after discussing your attitude to investment risk further, we agreed that you are most
comfortable being assessed as a Balanced investor also moving forward.

Balanced (50% Income / 50% Growth)


Based on the income and growth percentages for your risk profile, we have assessed the most
appropriate asset allocation for you as discussed later in this document.
You are Balanced investors looking for some capital growth and income over the medium to
long term. You require an investment strategy which will cope with the erosion that tax and
inflation can cause. Calculated risks would be acceptable to you in order to achieve good
returns.
Generally an investment having a high security would be expected to have very low growth
potential, and an investment having very high growth potential would have very low security of
capital.
Most investors regard risk as the potential to suffer a loss of capital during the term of the
investment. Adopting the above investment risk profile means that you have understood and
accepted the potential risk of negative returns across investments within your portfolio.
If you feel the above profile does not reflect your attitude to investing, it is important we have
further discussions before you implement our advice.

Refer to Appendices for:

The Investment Asset Classes

The Risk/Return Trade Off

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 12 of 69

SUMMARY OF RECOMMENDATIONS FLOWCHARTS


Recommendations for Paul - Now

Self-employed
Income

(2) $9,000 Personal Deductible


Contribution

Colonial First State


Superannuation
Account

(1) Rollover of Full Balance


($108,866*)

Existing Equip
Accumulation
Account

(3) Transfer all but $5,000 of balance


($775,512*)

Bank Account

(4) Minimum Pension Payments


($1,193* per fortnight)

Equip Transition to
Retirement Pension

*approximate values

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 13 of 69

Recommendations for Pauline Now


Employment
Income

(1) $15,715* Salary Sacrifice


Contributions and $1,000
Non-Concessional
Contribution

Non-Equip
Superannuation
Fund of your Choice

Colonial First State


Pension Account

(2) Rollover of Full Balance


($198,948*)

New Equip
Transition to
Retirement Pension

(3) Minimum Pension Payments


($306* per fortnight)

Bank Account

*approximate values
Paul and Pauline, the flowcharts above represent the recommendations that are to be
implemented now. You will both continue to make personal deductible, salary sacrifice
contributions (respectively) to your respective Equip accumulation accounts in future financial
years. Please see the subsequent Recommendations sections for Superannuation and Estate
Planning for more detailed discussion on the recommendations we have made for you both.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 14 of 69

RECOMMENDATIONS - SUPERANNUATION
Superannuation Rollovers
Paul, we recommend you rollover the balance of your Colonial First State superannuation
account to your existing Equip Personal accumulation account at your earliest convenience.
Pauline, we recommend that you rollover the balance of your Colonial First State Pension
account into a newly established Equip Transition to Retirement Pension at your earliest
convenience (full Transition to Retirement Pension recommendations detailed separately).
Benefits of our advice

Paul and Pauline, this will simplify administration as you will both hold the large
majority of your superannuation savings with Equip (Pauline you wish to maintain your
QSuper account).

Paul, consolidating your superannuation savings with Equip will facilitate the investment
of these funds into an Equip Transition to Retirement Pension (recommendation
detailed separately).

Paul, consolidating your superannuation accounts with Equip and then commencing an
Equip Transition to Retirement Pension (recommendation detailed separately) should
reduce your overall superannuation fees by approximately $710 p.a.
Risks and Implications

Pauline, rolling over the balance of your Colonial First State pension account to an Equip
Transition to Retirement Pension may increase your overall fees by approximately $711
p.a. Please note however that the large majority of your Colonial First State pension
funds are invested in the FirstRate Saver option ($170,679 of the total balance as at 20
Jan 2015), which is a cash option and has no investment management fee. Such a
predominant investment in a cash-based option means your superannuation assets are
not invested in line with your Balanced investor risk profile. If you were to align your
investment options with your Balanced risk profile within your Colonial account, it is
likely your total account fees would increase substantially. For instance, the FirstChoice
Wholesale Balanced option has an investment fee of 1.01% p.a. If you were to be
invested 100% in this option your total Colonial First State fees would be approximately
$2,884 p.a., which is $1,695 p.a. more than what you are paying now.

By rolling over your Colonial First State accounts, you will no longer have access to the
investment options or other fund-specific features offered through these accounts.
Paul and Pauline, please see the Replacement of Product Information section for more detail
on the fees you are currently paying, and the fees you will be paying after implementing our
recommendations.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 15 of 69

Salary Sacrifice and Personal Deductible Contributions


Pauline, we recommend you salary sacrifice 100% of your income between now and 30 June
2015 (approximately $15,715), and salary sacrifice a total of $20,500 to super in the 2015-16
financial year. We further recommend you continue to make salary sacrifice contributions to
super until retirement such that your income tax liabilities each financial year are minimised.
Paul, we recommend you make a personal deductible contribution to your Equip Personal
accumulation account of $9,000 in the current financial year, and $16,000 in the 2015-16
financial year. We further recommend you continue to make personal deductible contributions
to super until retirement such that your income tax liabilities each financial year are minimised.
While the modelling indicates you will still have small tax liabilities leading up to retirement,
increasing your personal deductible contributions by more than what we have recommended
will increase your super contributions tax (15%) by more than the resultant reduction in your
income tax.
Paul and Pauline, we recommend reviewing this strategy every twelve months to ensure you
remain on track to minimise your tax liabilities while not exceeding the concessional
contribution cap (which may change). Please see the Financial Modelling section for more
information on how much you may need to salary sacrifice to super to achieve this.
Benefits of this advice

Paul, as you are self-employed you are able to make personal deductible contributions
to super, which will be fully tax deductible to you. They are essentially the same as
salary sacrifice contributions.

Whilst these personal deductible and salary sacrifice contributions will incur
contributions tax of 15%, this is less than your respective marginal tax rates and should
therefore provide immediate tax savings. Paul, while your current taxable income is
quite low (approximately $25,000 p.a.), this will increase once you commence the
recommended Transition to Retirement Pension (recommendation detailed separately),
resulting in a greater need for salary sacrifice contributions from a tax minimisation
perspective.

Additional contributions will accelerate the accumulation of your superannuation assets


which will assist to meet the financial goal that you booth have to boost your retirement
savings and thereby assist you to meet your income goals in retirement.

Paul and Pauline, we estimate that these personal deductible and salary sacrifice
contributions should help to ensure that you generate a total overall combined tax
saving of approximately $2,389 for the 2014-15 financial year as illustrated by the below
tables:
Paul

Income Tax (Estimated)


Contributions Tax
Total Tax
Tax Benefit (Estimated)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

No Personal Deductible
Contributions

Recommended Personal
Deductible Contributions

$2,394

$571

$0

$1,350

$2,394

$1,921
$473

Page 16 of 69

Pauline
No Salary Sacrifice
Contributions

Recommended Salary
Sacrifice Contributions

$5,524

$1,251

$0

$2,357

$5,524

$3,608

Income Tax (Estimated)


Contributions Tax
Total Tax
Tax Benefit (Estimated)

$1,916

We estimate that salary sacrificing at this level should also ensure that you remain
below the $35,000 p.a. concessional contribution limit for the current and following
financial years. We estimate that your concessional contributions for the 2014-15 and
2015-16 financial years will be as follows:
Paul
Amount of
Contribution
(2014-15)

Amount of
Contribution
(2015-16)

N/A

N/A

$0

N/A

Recommended personal deductible contributions

$9,000

$16,000

Total Concessional Contributions for 2014-15

$9,000

$16,000

Amount of
Contribution
(2014-15)

Amount of
Contribution
(2015-16)

$3,837

$3,953

$0

$0

Recommended salary sacrifice contributions

$15,715

$20,500

Total Concessional Contributions for 2014-15

$19,552

$24,453

Type of contribution
Employer Superannuation Guarantee payment
Personal deductible contributions already this financial year

Pauline
Type of contribution
Employer Superannuation Guarantee payment
Salary sacrifice contributions already this financial year

Risks and Implications

Concessional contribution limits apply. Currently the concessional contribution limit is


Amount
of note that the
$35,000 for individuals aged 49 or over as of the 30th June 2014.
Please
Contribution
concessional contribution limit consists of employer Superannuation
Guarantee (SG),
salary sacrifice and personal deductible contributions. Contributions exceeding this limit
will be taxed at your maximum marginal tax rate plus an interest charge.
Please monitor your contributions regularly and contact your financial adviser
immediately if you believe you may breach your concessional contributions cap.

Contributions are generally preserved until you meet a condition of release (i.e.
retirement or reaching age 65).

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 17 of 69

Contributions tax of 15% applies to all salary sacrifice and personal deductible
contributions to superannuation.

Your employer may be required to pay superannuation guarantee on any bonuses


received and this would be included as part of your concessional contribution cap. You
did not advise of any bonuses you receive.

These contributions will reduce your disposable income and may affect your ability to
meet your required living expenses. This risk is mitigated by the recommended
Transition to Retirement Pension income which is providing you with surplus cash flow.

Pauline, your employer may base your Superannuation Guarantee (SG) entitlement on
your adjusted salary (salary after salary sacrificing) rather than your gross salary. This
will lower the amount of SG your employer pays to you. Please check with your
employer before commencing salary sacrifice contributions.

Non-Concessional Contributions
Pauline, we recommend you make a non-concessional contribution of $1,000 p.a. into
superannuation in the current financial year, and each subsequent financial year until
retirement. These contributions can be funded from current cashflow (earned income or
pension income) or from existing cash reserves.
Benefits of this advice

By making these non-concessional contributions you may be eligible for the


Government Co-Contribution, where the government matches up to $500 of your
superannuation contribution. Please see the Financial Modelling section for more detail
on how much of the Government co-contribution you may be eligible for.

The non-concessional contributions will increase your superannuation retirement


savings.

Non-concessional contributions are tax-free.

Superannuation is a concessionally taxed investment vehicle.

Upon reaching a condition of release (retirement or turning 65 years of age), your


superannuation funds are accessible at any time upon request and are tax-free.
Risks and Implications

Contributions are preserved until a condition of release is satisfied, e.g. retirement or


attaining 65 years of age (whichever occurs earlier).

Non-concessional contribution caps apply. Currently the non-concessional limit is


$180,000. Any personal post-tax contributions must not exceed the Non-Concessional
Contribution limit; otherwise the excessive amount is taxed at the top marginal rate of
49% (including the Medicare Levy and Temporary Budget Repair Levy).

These funds will be exposed to investment risk (in line with the inherent risk of your
chosen superannuation investments).

These contributions will reduce your disposable income and may affect your ability to
meet your required living expenses. This risk is mitigated by the recommended
Transition to Retirement Pension income which is providing you with surplus cash flow.

Legislation may change such that you are no longer eligible to receive a Government cocontribution.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 18 of 69

Individuals aged 65 and over can only make non-concessional contributions during a
financial year provided the work test is satisfied. The work test requires you to be
gainfully employed for at least 40 hours within a consecutive 30-day period within the
financial year of the contribution. Pauline, as we only recommend you continue to make
these non-concessional contributions while you are working, you will meet the work
test.

Loss of the Australian government bank guarantee

You will lose immediate access to these funds.

Equip Transition to Retirement Pensions (TRPs)


Paul, after rolling your Colonial First State account over to your existing Equip account, we
recommend you transfer all but $5,000 of the balance of your Equip accumulation account into
an Equip Transition to Retirement Pension (TRP). We recommend you draw the minimum
pension as a fortnightly income stream to assist in funding your lifestyle. Based on an estimated
opening account balance of $775,512, your minimum pension payments will be approximately
$1,193 per fortnight (approximately $31,020 p.a.).
Pauline, as recommended earlier, we recommend you transfer the balance of your Colonial First
State pension into a newly established Equip Transition to Retirement Pension at your earliest
convenience. We recommend you also draw the minimum pension (4% of the account balance)
as a fortnightly income stream to assist in funding your lifestyle in the lead up to retirement.
Based on an estimated opening account balance of $198,948 your minimum pension payments
will be approximately $306 per fortnight (approximately $7,958 p.a.).This applies for the
remainder of this financial year. From 1 July 2015 you will be required to draw an increased
minimum of 5% of your account balance as you will be 65 years of age as at 1 July 2015. Based
on a projected account balance of $201,797, your minimum pension payments will be
approximately $388 per fortnight (approximately $10,090 p.a.).
Paul and Pauline, we recommend you each make reversionary beneficiary nominations within
your respective Equip TRPs.
Benefits of this Advice

Transition to Retirement Pensions are a flexible means of providing retirement income.

Pauline, as you are over age 60, pension payments are tax-free.

Paul, your pension payments prior to age 60 are tax-efficient. Based on your current tax
components, approximately 8% of your pension payments will be tax-free and 92% will
be taxable. The taxable component of your pension payments attracts a 15% tax rebate.
Once you are over age 60, pension payments are tax-free.

The Transition to Retirement Pensions payments will assist you to meet your income
needs in the lead up to retirement, as you make salary sacrifice and personal deductible
contributions to super which will reduce your take-home pay considerably.

Transition to Retirement Pensions can be rolled back to accumulation phase upon


request.

Paul, the administration fee is capped at an account balance of $450,000. Therefore the
overall percentage fees reduce as the account balance increases .

Paul, investment earnings within a Transition to Retirement Pensions are tax-free. The
superannuation tax saving is estimated to be $8,934 assuming a 7.68% p.a. return for a
Balanced investor, as illustrated in the following table:

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 19 of 69

Superannuation Income Tax Comparison p.a.

Accumulation

Pension

Balance

$775,512

$775,512

Investment Earnings (7.68%)

$59,559

$59,559

Tax on Investment Earnings (15%)

$8,934

$0

$8,934

Tax Saving

You can choose the frequency of your pension payments (e.g. monthly, quarterly, half
yearly or annually).

Pauline, the funds we recommend you rollover from Colonial First State are already held
in the earnings tax-free pension environment.

Paul, maintaining a small balance in your Equip accumulation account will facilitate the
recommended personal deductible contributions.

For an analysis of the fees and charges please refer to the Disclosures section of this
Statement of Advice.

Pauline, while lump sums cannot be drawn from a Transition to Retirement Pension,
once you turn 65 your TRP will automatically become an Account Based Pension. At this
point 100% of your pension and accumulation funds will become unrestricted nonpreserved, and there will be no restrictions on how much you can draw from your
pension (and accumulation account), and all withdrawals will be tax-free.

A reversionary beneficiary nomination allows you to nominate a dependant (such as


your spouse) to receive the income stream upon your death. The reversionary pension
beneficiary will continue to receive the income stream for the duration of the pension
or have the option to cash out the income stream account as a lump sum at their
discretion, as long as they are your spouse at the time of death.

Risks and Implications

Paul, administration fees are higher in an Equip pension than in an Equip accumulation
account. This will result in a $597 increase in administration fees per year. Pauline,
please see the Product Replacement section for information on the fees you are
currently paying and what you will pay within your Equip TRP.

Drawing income which exceeds the earnings of your fund will increase the risk of you
exhausting your capital prematurely.

You must take the minimum pension payment each financial year. Based on your age
your minimum pension payments will be calculated on 4% of the 1 July account balance
(pro-rated in the year of commencement). Pauline, from 1 July 2015 you will be
required to draw at least 5% of the 1 July account balance, as you will be age 65 at 1 July
2015.

Paul and Pauline, you cannot draw more than 10% of the 1 July account balance from
your Transition to Retirement Pension as regular pension payments. Pauline this 10%
maximum income payment will no longer exist for you at your 65th birthday, when your
Transition to Retirement Pension converts to an Account Based Pension.

You are unable to withdraw lump sums from your Transition to Retirement Pensions.
You can take up to 10% of the 1 July balance as a single annual payment however.

The balance of your pensions may reduce to a level which is insufficient to meet your
income needs later in life, depending upon the performance of the underlying
investments and the level of income and capital you draw over time.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 20 of 69

Paul, pension payments from your Transition to Retirement Pension are taxable at your
marginal tax rate (less a 15% tax rebate) while you are under 60 years of age.

Investment Choice
Paul, we recommend that you change the investment selection within your Equip Personal
accumulation account prior to the recommended rollover so that future contributions are
invested in the Cash option.
Paul and Pauline, we recommend you invest your Equip TRPs with a time horizons (bucket)
approach. This involves investing your short to medium term income needs to cash and other
lower risk investments, with the remainder of funds invested in options that have higher growth
asset exposure. This strategy ultimately creates a portfolio in line with your Balanced investor
risk profile, as shown in the following tables:
Paul
Investment Choice

Weighting

Amount (approx.)

Cash

4%

$35,000

Conservative

48%

$370,256

Balanced Growth

48%

$370,256

TOTAL

100%

$775,512

Weighting

Amount (approx.)

5%

$10,000

Conservative

47.5%

$94,474

Balanced Growth

47.5%

$94,474

TOTAL

100%

$198,948

Investment Timeframe (approx.)


1-2 years income needs
Remainder of funds

Pauline
Investment Choice
Cash

Investment Timeframe (approx.)


1-2 years income needs
Remainder of funds

We recommend that your pension payments are drawn from the Cash investment option. In
addition, we recommend reviewing your investment strategy every year to ensure your asset
allocation is in line with your risk profile.
Paul, after commencing your TRP we recommend that you alter the investment selection within
your Equip Personal accumulation account so that the remaining balance and all future
contributions are invested in the Balanced investment option.
Pauline, we recommend you review the investment choice within your QSuper account to
ensure your accumulation assets are invested is in line with your Balanced investor risk profile.
You did not wish for us to review this account so we cannot make further comment on its
suitability for you. You intend on maintaining this account as your current employer
(Queensland government) contributes to this superannuation fund.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 21 of 69

Benefits of this advice

Paul, changing your future contributions investment election to Cash prior to the
recommended rollover will mean no buy/sell costs are incurred as part of the rollover.

Investing your pension portfolios with time horizons (bucket) strategies and drawing
your pension payments from the Cash option will allow the market-linked options to
move in line with investment fluctuations without impacting your immediate cashflow
needs. You will therefore not need to sell down on growth assets prior to their
recommended investment timeframes in order to fund your pension payments.

Pension and superannuation assets will be invested within the parameters of


your Balanced investor risk profile.

Assist to increase the value of your superannuation assets over time by increasing
exposure to growth assets and also assist to negate the impact of inflation.

The income and growth expected from investing in this portfolio will build your
superannuation and assist you to meet and maintain your income needs in retirement.

A regular review of your risk profile will assist to ensure the appropriate diversification
across all appropriate asset classes, and to ensure sufficient liquidity and capital growth
for your financial circumstances.
Risks and Implications

As you will be drawing your pension payments from the cash investment option, over
time the proportion of your pension held in growth asset such as shares and property is
likely to increase and potentially fall outside of your risk profile. We therefore
recommend you review your asset allocation on an annual basis and if necessary
rebalance your portfolio to ensure that this does not occur.

Increasing exposure to growth assets will expose your portfolio to increased risk and
therefore higher short-term market volatility.

Failure of the investment options to perform as expected may result in your desired
level of income in retirement not being met. Diversification across asset classes can help
to temper some of the fluctuations.

Paul, a small buy/sell cost of approximately $17 will be incurred when you make the
recommended investment switch within your Equip accumulation account (after
commencing your TRP). The switching fee will be deducted from your superannuation
benefits.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 22 of 69

RECOMMENDATIONS - ESTATE PLANNING


Wills
Paul and Pauline, you did not disclose whether you have Wills in place or not. We recommend
that with the help of your solicitor you establish a Will to reflect your current financial situation
at your earliest convenience, if you have not already done so.

Powers of Attorney
Paul and Pauline, you did not disclose whether you have Enduring Powers of Attorney in place.
We recommend that with the assistance of your solicitor you establish Enduring Powers of
Attorney at your earliest convenience, if you have not already done so.

Binding Death Nominations


Pauline, we recommend you put in place a binding death benefit nomination within your
QSuper account, if you have not already done so.

Estate Planning- General


Although considerable emphasis is placed on wealth creation and protection, a third vital aspect
of your financial strategy is how your wealth will be distributed after your death.
Estate planning is the planning and documentation of your wishes for the distribution of your
wealth following death, including assets you own personally as well as assets you control or the
control of your assets while you are still living but unable to exercise your own decisions.
Estate planning is a specialist area and it is therefore important you obtain professional legal
advice in relation to all areas of your estate plan. However we outline below some of the issues
you should consider in designing your estate plan.
Regardless of whether you have a current Will and Power of Attorney in place it is worthwhile
reviewing these on a regular basis to ensure that they continue to fulfil your wishes. .
Further information on Estate Planning can be found in the attached appendices

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 23 of 69

ALTERNATIVE AND POSSIBLE FUTURE STRATEGIES


Alternative Strategies Considered
Other strategies we have considered when assessing your goals and objectives:

Maintaining your superannuation monies in accumulation phase - Paul


This strategy was not recommended for the following reasons:

Earnings on funds held in accumulation phase are taxed at up to 15%. Earnings on funds
held in pension phase are tax-free.

Accumulation accounts do not provide a regular income to meet your ongoing needs as
your take home pay reduces as a result of the recommended personal deductible and
salary sacrifice contributions for yourself and Pauline (respectively). The TRP income will
help you meet your ongoing income needs in the lead up to retirement.

Cash out Colonial First State Pension at age 65 - Pauline


Pauline, at your 65th birthday on 6 April 2015, you will be eligible for a full cash out of your
pension account balance. However, it is considered appropriate to attend to a pension rollover
prior to your birthday (i.e. as soon as possible) to ensure you are invested in accordance with
your Balanced investor profile and not out of markets as you are now with your current cash
investment option within your Colonial First State pension account.
Cashing out would also mean that the funds would have to be contributed back into
superannuation before a Transition to Retirement Pension could commence. This involves
additional administration and the funds contributed would be a non-concessional contribution
to superannuation using the Non-concessional capping limit bring forward rule.
Also, the adding of these cashed out funds to your younger spouse, Pauls superannuation was
considered and is not suitable. At your 65th birthday Pauline your funds will become
unrestricted non-preserved status, however while Paul continues to work, his super and pension
accounts will be preserved funds with limited cashing ability of a maximum of 10% of the
account balance for Pauls Transition to Retirement Pension.

Possible Future Strategies


Re-contribution
Paul, you may wish to consider implementing a re-contribution strategy in future. This involves
withdrawing funds from super and directing them back into super via a non-concessional
contribution. This increases the tax-free component of your super savings, reducing any
potential tax liability payable by non-tax dependants (e.g. adult children) upon your death. Tax
dependants such as a spouse pay no tax on superannuation death benefits, but adult children
currently pay 17% tax (including Medicare Levy) on such inheritances.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 24 of 69

Commonwealth Seniors Health Card


Paul and Pauline, our financial modelling indicates that you may not be eligible for any Age
Pension entitlements due to your significant assets. However, you may still be eligible for the
Commonwealth Seniors Health Card. Centrelink will be able to assess your eligibility for this card
as well. Please see the Appendix section for more information.

Make additional Non Concessional Contributions to Superannuation Paul


As shown in our financial modelling, your bank account balance will increase due to the
personal income tax savings (from the salary sacrificing and personal deductible contributions to
superannuation) and income from the pensions. At future reviews, you may consider to make
additional non-concessional contributions to your superannuation from your surplus savings in
your bank account.

Consolidate TRP and Accumulation Accounts into an Account Based Pension - Paul
Paul, at retirement you will no longer have need for an accumulation account. You may
therefore wish to consider consolidating your accumulation and TRP accounts into a new
Account Based Pension. An Account Based Pension has the same benefits and risks as the
recommended TRP, with the additional benefit of unlimited withdrawals at any time.

Cash out QSuper accumulation account after age 65 Pauline


Pauline, once you reach age 65 you will have met a condition of release, meaning you can
access 100% of your superannuation savings, tax-free. You may wish to consider cashing out
some or all of your QSuper monies to fund your lifestyle goals and needs if required. Please note
however that whilst you are working you should maintain a balance in this account to facilitate
your ongoing employer and personal superannuation contributions.

Cash out Super and Pension and add to Pauls super at Pauls retirement Pauline
Pauline, this may be advantageous to reduce administration costs for your combined retirement
savings.
These and any other strategies that may become appropriate can be reviewed in future.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 25 of 69

CURRENT ASSET ALLOCATION


Asset allocation is the term used to refer to how your current investments are distributed among
various asset classes (e.g. Australian equities, property, fixed interest and cash).
The following chart illustrates the allocation of your current investment assets across each of the
major asset classes. Please note, this chart does not include personal assets such as your family
home.

Current Overall Asset Allocation

Overall, you have a combined asset allocation of approximately 43% growth assets and 57% income
generating assets which is within the parameters of a Balanced investor risk profile.
Please note, while your overall asset allocation is in line with your Balanced investor risk profile, you
are currently overweighted to domestic cash, due to your considerable cash reserves outside of
super (of which you wish to maintain approximately $50,000), and significant cash investments in
Paulines Colonial First State Pension.
Please also note that the above graph does not include Paulines QSuper investments, as details on
how this account is invested were not provided.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 26 of 69

PROPOSED ASSET ALLOCATION


Paul and Pauline, we believe it is prudent to preserve your accumulated assets, however it is
important to achieve a steady real return (in excess of inflation) to achieve your medium to long
term goals and to ensure the sustainability of your accumulated assets.
We recommend you increase your current exposure to growth assets and further recommend that
you regularly review your investment asset allocation now and on an ongoing basis to ensure
appropriate diversification across all appropriate asset classes, and to ensure sufficient liquidity and
capital growth under your circumstances.
The following chart illustrates the allocation of our recommended investment portfolio across each
of the major asset classes:

Proposed Overall Asset Allocation

By implementing the recommendations in this Statement of Advice, we estimate that your overall
asset allocation will alter to 46% exposure to growth assets and 54% exposure to income generating
assets which is within the parameters of your Balanced investor risk profile.
We have assumed $20,000 of existing cash reserves has been used to fund your planned travel in
2015 ($15,000) as well as your home renovations ($5,000).
This benchmark asset allocation is an indicative allocation only. Over time, your portfolios actual
asset allocation will fluctuate depending on economic conditions, anticipated market movements
and the performance of the investments in your profile. If you are not prepared to accept the
associated investment risk of our recommended investment portfolio (asset allocation), it would
be essential that you review your stated goals and objectives and specified time frames.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 27 of 69

PROJECTED KEY RESULTS


Projected Long-term Outcome
Paul & Pauline, as discussed previously, you did not provide a specific expenditure goal that you wish to achieve in retirement. As a result, for the primary
financial modelling we have assumed you maintain living expenses in retirement of $50,000 p.a. This is based on your current living expenses
(approximately $35,000 p.a., being Paulines after-tax income which you stated you are currently living off), plus allowance of $15,000 p.a. for travel.
The financial modelling indicates that you may accrue sufficient capital to meet this level of expenditure throughout retirement, and also your various
capital expenditure goals (home renovations and ongoing travel now and in retirement).
Please note: A number of further assumptions have been used in the preparation of these calculations, which may not accurately reflect your retirement
position. The projection provides a good general overview but careful review will be required over time to ensure that you remain in a position to fund your
lifestyle over the period of your life time.
In the preparation of the financial projections we have assumed you will implement all the recommendations and assumptions outlined in this Statement of
Advice. Please refer to the Financial Modelling section for a list of the assumptions used in the financial projections.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 28 of 69

The above graph illustrates what sources will provide the funding for your desired retirement income. The following graph illustrates the present value of
your retirement assets over time which allows you to fund your desired retirement lifestyle.

Detailed modelling projections in relation to the above can be found in the Financial Modelling section of this Statement of Advice. Please also refer to the
Disclaimers section for the limitations of financial projections.

Potential for More Comfortable Retirement Lifestyle - $90,000 p.a. Retirement Expenditure
Paul & Pauline, the primary financial modelling for which we have assumed you maintain living expenses of $50,000 p.a. in retirement (including travel
expenditure) indicates that you may achieve this level of expenditure comfortably. As a result we have conducted further financial modelling to analyse the
highest level of spending your assets may allow you to maintain in retirement. Our projections indicate you may have the capacity to fully fund an
expenditure level of $90,000 p.a. throughout retirement.
For this alternative scenario, all assumptions remain the same (as the primary modelling), except for the higher level of spending in retirement. Again, it is
important to note that these assumptions may not accurately reflect your retirement position and therefore should be used as a guide only.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 29 of 69

The above graph illustrates what sources will provide the funding for this higher level of retirement spending. The following graph illustrates the present
value of your retirement assets over time which allows you to fund this more comfortable retirement lifestyle.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 30 of 69

REPLACEMENT OF PRODUCT INFORMATION


We have considered and recommended the replacement of your existing investments in the
following products:
Paul Rollover your Colonial First State accumulation account to Equip and commence an Equip
Transition to Retirement Pension
CURRENT

RECOMMENDED

Colonial First State


Superannuation

Equip Personal
Superannuation

Equip Personal
Superannuation

Equip Transition to
Retirement Pension

$108,866

$671,645

$5,000

$775,512

Nil

N/A

N/A

N/A

Investment Option (as per Risk Profile)

CFS Cash

Equip MySuper

Balanced

Mixed (overall
Balanced)

Asset Allocation (Growth / Defensive)

0 / 100 (approx.)

60 / 40 (approx.)

50 / 50 (approx.)

48 / 52 (approx.)

Sector and Pre-mixed Options

Yes

Yes

Yes

Yes

Current Insurance

Nil

Nil

Nil

N/A

Flat Administration Fees

Nil

$78

$78

Nil

Asset-based Administration Fees

Nil

$1,437 (0.21%)

$14 (0.28%)

$2,196 (0.28%)

Investment Fees

$1,241 (1.14%)

$4,366 (0.65%)

$29 (0.57%)

$4,094 (0.53%)

Total Ongoing Fees p.a.

$1,241 (1.14%)

$5,881 (0.88%)

$121 (2.41%)

$6,289 (0.81%)

Account Balance
Exit Fees (if applicable)

Ongoing Fees

Paul, you also pay a 4% contribution fee on all contributions into your Colonial First State account.
Pauline - Rollover your Colonial First State pension to an Equip Transition to Retirement Pension
CURRENT

RECOMMENDED

Colonial First State Pension

Equip Transition to Retirement Pension

$198,948

$198,948

Nil

Nil

Investment Option (as per Risk Profile)

Mixed

Mixed (overall Balanced)

Asset Allocation (Growth / Defensive)

14 / 86 (approx.)

48 / 52 (approx.)

Sector and Pre-mixed Options

Yes

Yes

Current Insurance

N/A

N/A

Flat Administration Fees

Nil

Nil

Asset-based Administration Fees

Nil

$855 (0.43%)

Investment Fees

$318 (0.16%)

$1,054 (0.53%)

Adviser Fee

$875 (0.44%)

Nil

$1,193 (0.60%)

$1909 (0.96)

Account Balance
Exit Fees (if applicable)

Ongoing Fees

Total Ongoing Fees p.a.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 31 of 69

Pauline, please note that while your superannuation fees will increase by approximately $711 p.a. by
rolling over to an Equip TRP, the large majority of your Colonial First State funds are invested in the
FirstRate Saver option ($170,679 of the total balance as at 20 Jan 2015), which is a cash option and
has no investment management fee. Such a heavy investment in a cash option means you are not
invested in line with your Balanced investor risk profile. If you were to align your investment options
with your Balanced risk profile within your Colonial account, it is likely your total account fees would
increase substantially. For instance, the FirstChoice Wholesale Balanced option has an investment
fee of 1.01% p.a. If you were to be invested 100% in this option your total Colonial First State fees
would be approximately $2,884 p.a.
Please see the earlier Superannuation Rollovers section for further information on the associated
benefits and risks involved with these recommended transactions.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 32 of 69

ONGOING REVIEW SERVICE


A financial plan requires regular review in order to ensure that it continues to meet your needs. The
review process should address:

your changing needs and objectives


your income and debt levels
your family situation and health.
your taxation position
the economic environment
investment sector performance
social security issues
investments available
taxation position of investments
fund manager and investment performance

All these factors are subject to change and these changes may have significant impact on the
suitability of your portfolio. Equipsuper Financial Planning Pty Ltd recommends ongoing reporting
and advisory services as this will enable you to review your financial strategy regularly and to alter
your portfolio as required.
Recommended Review Service
We recommend that you sign on to our annual review service which entitles you to:

An annual meeting with your Financial Planner

Your own personalised review document each year outlining your financial plans. This
document may contain for example updates to recommendations such as salary sacrifice
amounts, investment choice, pension rebalancing, optimising Centrelink entitlements, and
any other relevant recommendations.

Discussions about various financial issues

Access to your financial planner on an ad hoc basis

The cost of the annual review service is $550 p.a. (inclusive of GST). Remember that any costs
associated with your annual review fee can be deducted from your Equip account where the advice
provided relates mainly to your account with Equip.
Please note, if you do not participate in an annual review, previously implemented strategies may
not continue to be appropriate to your changing needs and circumstances.
Time Horizons (Bucket) Approach
A time horizons (bucket) approach can be adopted with respect to your superannuation/pension
assets. This is a dynamic strategy involving investment in multiple options and is recommended to
ensure the risk of crystallising any short-term market losses is minimised as you draw a regular
retirement income, while maintaining an overall portfolio that reflects your Balanced risk profile.
By the very nature of this strategy, your growth asset allocation may increase beyond an acceptable
level for a Balanced investor as you draw your income from the less risky options. It therefore could
become important for you to seek an annual review of your portfolio to ensure your portfolio aligns
to your risk profile.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 33 of 69

DISCLOSURES
It is important that you understand the costs payable by you for the financial services we have
provided. This section outlines the costs payable by you and will also detail the fees and benefits
that Equipsuper Financial Planning Pty Ltd are entitled to receive for providing these services.
In addition to the fees paid to us, the investment and/or insurance products we recommend to you
may also charge fees. Please refer to the appropriate Product Disclosure Statement (PDS) for further
information.

What you will pay and what we will receive


Representative Remuneration
Your financial planner is an employee representative of Equip Financial Planning and is paid by way
of salary.

Plan Preparation Fee


Fee Description

Total Fee Amount

Plan Preparation Fee

$1,100

Total

$1,100

Ongoing Review Fee


Fee Description

Total Fee Amount

Ongoing Review Fee*

$550 p.a.

*This entitles you to an annual review appointment and an updated advice document issued
following your appointment as well as ad-hoc access to your financial planner throughout the year.
Should you choose not to sign up to the recommended review service, additional financial planning
services including review appointments and updated advice will be charged at $143 per hour.

Investment Fees
Pauls Equip Personal Accumulation Account
Investment

Amount
Invested
$

Average
Administration/
Trustee Fee (pa)
%

Flat Admin Fee


Balanced
Special Charge
TOTAL

Investment
management fees
%

Total (pa)
%

$78

$
$78

$5,000

0.20%

$10

0.57%

$29

0.77%

$39

Balance

0.08%

$4

0.00%

$0

0.08%

$4

$5,000

1.84%

$92

0.57%

$29

2.41%

$121

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 34 of 69

Pauls Equip Transition to Retirement Pension


Investment

Amount
Invested

Average
Administration/
Trustee Fee (pa)

Investment
management fees

Total (pa)

Cash

$35,000

0.20%

$71

0.06%

$21

0.26%

$92

Conservative

$370,256

0.20%

$752

0.45%

$1,666

0.65%

$2,418

Balanced Growth

$370,256

0.20%

$752

0.65%

$2,407

0.85%

$3,159

Special Charge

Balance

0.08%

$620

0.00%

$0

0.08%

$620

TOTAL

$775,512

0.28%

$2,195

0.53%

$4,094

0.81%

$6,289

Paulines Equip Transition to Retirement Pension


Investment

Amount
Invested

Average
Administration/
Trustee Fee (pa)

Investment
management fees

Total (pa)

Cash

$10,000

0.35%

$35

0.06%

$6

0.41%

$41

Conservative

$94,474

0.35%

$331

0.45%

$425

0.80%

$756

Balanced Growth

$94,474

0.35%

$331

0.65%

$614

1.00%

$945

Special Charge

Balance

0.08%

$159

0.00%

$0

0.08%

$159

TOTAL

$198,948

0.43%

$855

0.53%

$1,045

0.96%

$1,901

Fee Notes
Equip Accumulation
Paul, the investment amount is based on the $5,000 we recommend you maintain in your Equip
accumulation account when you commence an Equip Transition to Retirement Pension.
All fees are paid to Equipsuper Pty Ltd as trustee for the Equip Superannuation Fund.
Investment management fee (IMF) is calculated at the percentage rate shown based on the
investment amount shown. The dollar amount of the IMF will change depending on movements in
your account. The IMF is deducted monthly from fund assets before investment returns are
calculated.
Administration fee: $1.50 per week plus 0.20% per annum up to a maximum account balance of
$450,000, plus 0.08% per annum*. The 0.20% is calculated and deducted from your account
effective on the last day of every month. The 0.08% is deducted from the underlying asset value and
reflected in the daily unit prices applied to your account.
The actual dollar amount of the Administration fee will change depending on movements in your
account.
Buy and Sell costs reflect the brokerage and transaction cost incurred. It is charged through a
differential between the buy and sell price of units.
*The administration fee includes a 0.08% per annum provision to build Equips reserves, to cover
operational risks and expenses incurred in running the Fund.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 35 of 69

Equip Pensions
Paul, the investment amount is based on the combined balances of your Equip accumulation
account and your Colonial First State accumulation account at 9 February and 15 January 2015
(respectively), less the $5,000 we recommend you maintain in your Equip accumulation account.
Pauline, the investment amount is based on the balance of your Colonial First State pension account
as at 15 January 2015.
All fees are paid to Equipsuper Pty Ltd as trustee for the Equip Superannuation Fund.
Investment management fee (IMF) ranges from 0.06% to 0.75% p.a. and is calculated at the
percentage rate shown based on the investment amount shown. The dollar amount of the IMF will
change depending on movements in your account. The IMF is deducted from the gross investment
return and included in the daily unit price calculation.
Administration Fee: 0.35% per annum up to a maximum account balance of $450,000, plus 0.08%
per annum*. The 0.35% is calculated and deducted from your account effective on the last day of
every month. The 0.08% is deducted from the underlying asset value and reflected in the daily unit
prices applied to your account.
The actual dollar amount of the Administration fee will change depending on movements in your
account.
Buy and Sell costs reflect the brokerage and transaction cost incurred. It is charged through a
differential between the buy and sell price of units.
*The administration fee includes a 0.08% per annum provision to build Equips reserves, to cover
operational risks and expenses incurred in running the Fund.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 36 of 69

DISCLAIMERS
Appropriateness and Suitability
Generally, section 961B of the Corporations Act 2001 (Cth) requires that we must act in your best
interests. Our recommendations to you must have a reasonable basis and be appropriate for you
considering your relevant personal circumstances and our reasonable inquiries.
In preparing this advice we have relied on the information you have supplied being accurate and
complete and if this is not the case, you should contact us or make your own assessment of the
appropriateness of the advice before acting upon our recommendations.
We ask you to read the recommendations and supplementary information provided to you including
the Product Disclosure Statements and ensure you fully understand the contents. Where you have
any queries, please consult your adviser before proceeding.
This advice has been prepared solely for your use and should not be used as a guide by any other
person, to whom Equipsuper Financial Planning Pty Ltd or any of its Representatives do not accept
any liability.

Time Limitation
The recommendations in this advice are based on your current personal circumstances, lifestyle and
financial goals, current economic, investment and legislative conditions. The recommendations in
this advice only remain current for a period of thirty (30) days from the date of this advice. If you
wish to implement these recommendations after this time period you must contact us prior to acting
to ensure that none of the above factors have changed and that the recommendations remain
appropriate to you.

Cooling Off Rights


In respect of the specific financial products we recommend as part of our advice you may be entitled
to a 14 day cooling off period. If a 14 day cooling off period applies, it commences from the earliest
of when you receive confirmation of your policy/investment or the end of the fifth day after the
product was purchased by or issued to you.
Cooling off periods apply to risk insurance products (general and life), investment life insurance
products, unlisted managed fund products, superannuation products, and Retirement Savings
Accounts:
Insurance within this period, you can change your mind and request that your policy be cancelled
and premium refunded. Your refund will be the amount of premium paid.
Investment within this period, you can change your mind and request for your capital to be
returned to you. You may, however, get back less or more than what you originally invested as a
result of market movements.
You should refer to the Product Disclosure Statement for each of the recommended
investments/policies in order to understand the operation of each providers cooling off period.

Assumptions and Illustrations


The projections contained within this advice are based on a number of critical assumptions that
primarily relate to economic and investment conditions and legislation. Also illustrations of future
income and capital growth rates are based on market or investment managers past performances.
As a consequence, the ability of the projections to predict actual long term outcomes is limited.
Accordingly such figures are illustrations and Equipsuper Financial Planning Pty Ltd does not
guarantee the outcome of these projections and are intended as a guide only.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 37 of 69

For the figures used, please refer to the Assumptions.


In addition, the taxation estimates are intended as a guide only and are dependent on the
continuation of current taxation treatment of deductible expenses as well as current tax scales and
Medicare Levy.
While every effort has been made to include current and relevant tax and social security legislation
we advise you to discuss your annual tax liability and the tax and social security implications of this
with your accountant or a qualified tax adviser. In relation to any social security entitlements we
recommend you make an appointment with a representative of Centrelink at your nearest
Centrelink office for an assessment of your actual entitlements.

Limitation of Liability
In the event that any advice or other services rendered by Equipsuper Financial Planning Pty Ltd
constitute a supply of services to a consumer under the Competition and Consumers Act 2010 (as
amended) or the Australian Securities and Investments Commission Act 2001, then the liability of
Equipsuper Financial Planning Pty Ltd for any breach of any conditions or warranties implied under
the Act shall not be excluded but will be limited to the cost of having the advice or services supplied
again.
Subject to the above paragraph, nothing in any paragraph of this disclosure affects any rights or
remedies to which you may be entitled under the Competition and Consumers Act 2010 (as
amended) or under the Australian Securities and Investments Commission Act 2001 or under the
Corporations Act 2001 (Cth) as a consequence of services being rendered by Equipsuper Financial
Planning Pty Ltd.
Each paragraph of this disclaimer shall be deemed to be separate and severable from each other. If
any paragraph is found to be illegal, prohibited or unenforceable, then this shall not invalidate any
other paragraphs.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 38 of 69

WHERE TO FROM HERE?


We recommend that you read the enclosed Product Disclosure Statement(s) (PDS) and Appendices.
Please contact us should you have any questions about the information or would like any part of the
Statement of Advice explained further. Once you are satisfied with our recommendations and wish
to proceed, we will assist you with the implementation of your Statement of Advice.
The first step in the implementation process is for you to sign the Authority to Proceed.

Relevant Paperwork
Below is a summary of the relevant paperwork required for you to complete in order to implement
the recommendations:
Relevant Recommendation

Action

Super and Pension Rollovers Paul and Pauline

Both to complete Equip Rollover Authority form and


Pauline to complete Equip Membership Application (and
relevant Colonial First State forms)

Self-Employed Personal Deductible Contribution - Paul

Complete Application to Make Voluntary Contributions


form

Equip TRPs Paul and Pauline

Both to complete Equip Application for a Pension and Paul


to complete Tax File Number Declaration (as you are under
age 60)

Member Investment Choice Paul

Complete Investment Choice Variation Form (Super)

Non-Concessional Super Contributions Pauline

Pauline to complete Equip Application to Make a Voluntary


Contribution for non-concessional contribution

Please note that we are able to assist you to complete any of the above forms.
Relevant Recommendation

Required Documents

Transition to Retirement Pensions

Copy of Drivers Licence or Passport

Transition to Retirement Pensions

Original bank statement for the account you would like the
pension payment to be paid into.

Please refer documentation to:


Kristine Spiteri
Representative of Equip Financial Planning Pty Ltd
Level 57, 19-29 Martin Place
SYDNEY NSW 2000

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 39 of 69

AUTHORITY TO PROCEED
Upon receiving the advice dated 16 February 2015 and reading the strategy and recommendations
contained within, we confirm the following:

We have received and retained a copy of the Financial Services Guide.


The details in relation to our personal circumstances, financial position and lifestyle and
financial objectives are accurately summarised.
We understand the basis of the advice.
We understand the recommendations made, and where we did not, we have sought and
received clarification.
We understand and agree with the risk profile assessment, and the recommended asset
allocation of the portfolio.
We confirm we have been provided with and understand the information about
remuneration (including commissions) and other benefits paid or payable as a result of this
SoA.
We have received and retained the research pages provided and the applicable Product
Disclosure Statements.
We understand the projected returns illustrated in this advice and attachments are not
guaranteed.
The contents of the advice are for our sole use.
The advice was prepared by Kristine Spiteri acting on behalf of Equipsuper Financial Planning
Pty Ltd, an Australian Financial Service Licence (No. 455010 ), when providing this advice.
We understand that the strategy and recommendations made in this advice rely on the
continuation of current legislation.
We have received information regarding our rights under the Privacy Act and consent to the
information collected being used in the manner described within and to the passing of
information to a third party, which Equipsuper Financial Planning Pty Ltd may use from time
to time for the purpose of preparing financial reports for us (the third party Equipsuper
Financial Planning Pty Ltd has contracted to perform this function, have agreed to abide by
the Privacy Policy).

Accordingly, we wish to proceed with the implementation of the strategy and recommendations and
authorise Equipsuper Financial Planning Pty Ltd to implement these. Where there are variations
these are noted below:
......
......
......
......
......
......
......
......
......
......
......
......
......
......
......

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 40 of 69

Signed:

Signed:

Name: Paul Xuereb

Name: Pauline Xuereb

Date:

Date:

Accepted for and on behalf of Equipsuper Financial Planning Pty Ltd by:
Signed:
Name: Kristine Spiteri
Date:

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 41 of 69

FINANCIAL MODELLING
To assist you to understand the effects of the recommendations made in this Statement of Advice,
we have prepared projections of your personal and financial circumstances.
Please note that all projections provided should be used as a guide only, and do not constitute a
guarantee of future investment performance or of your financial position at any point in time.
Projections are based on current legislation, tax rates and Centrelink procedures where applicable.

Summary of Assumptions

You implement all recommendations in this Statement of Advice.

Paul, you continue working until retirement at 21 October 2018. Your current gross income of
$25,000 p.a. increases at 3% p.a.

Pauline, you continue working until retirement at 2018. Your current gross income of $40,394
p.a. increases at 3% p.a.

We have assumed living expenses of $35,000 p.a. between now and 1 July 2016 (Paulines
approximate net income, as you stated you are currently living solely off Paulines income). We
have included a separate amount of $15,000 in the 2015-16 financial year for your planned
overseas travel. From 1 July 2016 we have assumed living expenses of $50,000 p.a., which
includes allowance of $15,000 p.a. for ongoing domestic and international travel. You meet the
cost of your planned 2015 travel with funds held in Pauls business account, after which your
ongoing travel expenses are absorbed by your various inflows (earned income and pension
income).

You each continue to make $1,000 non-concessional contributions to super until your respective
retirements, to be eligible to receive the Government co-contribution. You withdraw $2,000 to
fund these contributions in the current financial year, after which they are funded from ongoing
employment income.

You both also continue to make personal deductible and salary sacrifice contributions to super
until your respective retirements, such that your personal income tax liabilities are minimised.

Provision has also been made for your planned home renovations in the 2015-16 financial year
at a cost of $5,000.

We have not included your credit card debt in the financial modelling (currently $15,300 as this
is used for day-too-day living expenses and you stated that you repay the balance in full each
month.

You both consolidate your pension and accumulation accounts into a new Account Based
Pension at your respective retirements.

Your super and pension assets earn a Balanced rate of return of 7.68% p.a. This rate of return is
net of fees.

The value of your home increase at 4% p.a.

Your bank accounts earn interest of 4% p.a. All interest generated is reinvested (as opposed to
being received as income).

Your shares earn 6% growth and 4% income, with 70% of the income franked. All dividends
generated from your shares are received as income (as opposed to being reinvested).

Cashflow surpluses are directed to your joint bank account.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 42 of 69

Cashflow
Date
Age - Paul
Age - Pauline
Income
Self-employed Income - Paul
Gross Income - Pauline
Pension Income
TRP/ABP Income - Paul
TRP/ABP Income - Pauline
Cash Withdrawals
Superannuation
Lump Sum Withdrawals (Govt Payments)
Total Inflow
Expenditure
Living Expenses (including travel from 1/7/16)
Travel
Renovations
Taxation
Paul
Pauline
Superannuation Contributions
Salary Sacrifice Pauline
Deductible Contributions - Paul
Non-Concessional Contributions - Paul
Non-Concessional Contributions - Pauline
Total Outflow
Net Cashflow

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

9,726
15,715

25,750
41,606

20,273
32,757

6,249
0

27,318
0

8,634
0

0
0

0
0

0
0

0
0

12,068
3,096
2,000

31,465
10,090
20,000

24,956
7,922
0

7,692
3,594
0

33,878
15,350
0

10,786
4,838
0

28,348
10,930
0

41,972
16,198
0

43,429
16,639
0

44,937
17,092
0

924

500

42,605

128,910

85,909

17,536

77,470

24,259

39,277

58,670

60,068

62,029

13,616
0
0

36,050
15,000
5,000

40,547
0
0

12,498
0
0

54,636
0
0

17,268
0
0

39,007
0
0

57,964
0
0

59,703
0
0

61,494
0
0

560
726

806
39

0
0

819
-6

734
-453

0
0

0
-356

0
-550

0
-604

0
-665

15,715
9,000
1,000
1,000
41,618

20,500
16,000
1,000
1,000
95,396

14,000
0
1,000
1,000
56,547

0
18,000
0
0
31,311

0
20,000
1,000
0
75,918

0
0
1,000
0
18,268

0
0
0
0
38,651

0
0
0
0
57,414

0
0
0
0
59,098

0
0
0
0
60,829

988

33,515

15,586

1,552

6,617

1,256

970

1,200

Page 43 of 69

Page 43 of 69

Tax (Paul)
Date
Age - Paul
Age - Pauline

1 Jul 14
55.7
64.2

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

Income
Self-employed Income
Superannuation Income Streams Taxed Element
Investment Earning
Total Assessable Income

25,000
11,166
1,369
37,534

25,750
29,101
1,473
56,324

20,273
23,081
1,683
0

6,249
7,115
535
58,936

27,318
31,333
2,602
61,254

8,634
9,976
840
0

0
79
1,921
21,450

0
0
2,980
2,980

0
0
3,125
3,125

0
0
3,269
3,269

9,000
9,000

16,000
16,000

0
0

18,000
18,000

20,000
20,000

0
0

0
0

0
0

0
0

0
0

28,534

40,324

40,936

41,254

21,450

2,980

3,125

3,269

Gross Tax Payable

1,964

4,441

4,643

4,748

389

Non-Refundable Tax Offsets


Low Income Tax Offset
Superannuation Income Streams Rebate (15%)
Total Non-Refundable Tax Offsets

445
1,675
2,120

267
4,365
4,632

0
0
0

272
4,529
4,801

280
4,700
4,980

0
0
0

300
1,508
1,808

300
0
300

300
0
300

300
0
300

571

806

819

734

571
1.52%
19.00%

806
1.43%
33.00%

0
0.00%
0.00%

819
1.39%
33.00%

734
1.20%
33.00%

0
0.00%
0.00%

0
0.00%
19.00%

0
0.00%
0.00%

0
0.00%
0.00%

0
0.00%
0.00%

Deductions
Self-employed Deductible Contributions
Total Deductions
Taxable Income

Tax Payable
Levies
Medicare Levy
Net Tax Payable
Average Tax Rate
Marginal Rate (excl Medicare)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 44 of 69

Page 44 of 69

Tax (Pauline)
Date
Age - Paul
Age - Pauline

1 Jul 14
55.7
64.2

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

Income
Gross Income
Investment Earning
Franking Credits
less Salary Sacrifice Contributions
Total Assessable Income

40,394
2,693
397
15,715
27,769

41,606
2,710
374
20,500
24,190

32,757
2,724
314
14,000
0

0
880
104
0
22,780

0
4,103
453
0
4,557

0
1,347
153
0
0

0
3,101
356
0
4,957

0
4,801
550
0
5,351

0
5,128
604
0
5,733

0
5,474
665
0
6,139

Taxable Income

27,769

24,190

22,780

4,557

4,957

5,351

5,733

6,139

1,818

910

642

Refundable Tax Offsets


Franking Credits
Total Refundable Tax Offsets

397
397

374
374

314
0

104
104

453
453

153
0

356
356

550
550

604
604

665
665

Non-Refundable Tax Offsets


Low Income Tax Offset
Senior Australians Pensioner Tax Offset
Mature Age Worker Tax Offset
Total Non-Refundable Tax Offsets

445
0
500
945

300
0
500
800

0
0
0
0

300
681
500
1,481

300
1,602
0
1,902

0
0
0
0

300
1,602
0
1,902

300
1,602
0
1,902

300
1,602
0
1,902

300
1,602
0
1,902

Tax Payable

696

-264

-104

-453

-356

-550

-604

-665

Levies
Medicare Levy

555

303

99

1,251
4.51%
19.00%

39
0.16%
19.00%

0
0.00%
0.00%

-6
-0.02%
19.00%

-453
-9.95%
0.00%

0
0.00%
0.00%

-356
-7.19%
0.00%

-550
-10.27%
0.00%

-604
-10.54%
0.00%

-665
-10.83%
0.00%

Gross Tax Payable

Net Tax Payable


Average Tax Rate
Marginal Rate (excl Medicare)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 45 of 69

Page 45 of 69

Superannuation (Paul)
Date
Age - Paul
Age - Pauline

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

780,512

14,999

31,898

34,576

50,930

73,845

76,351

500

0
775,512
0
8,650
9,000
1,000
1,350
399
500
500
49
500
14,999

0
0
0
14,600
16,000
1,000
2,400
2,273
306
306
281
0
31,898

0
0
0
1,000
0
1,000
0
1,914
0
0
236
0
34,576

0
0
0
15,300
18,000
0
2,700
877
285
285
108
0
50,930

0
0
0
18,000
20,000
1,000
3,000
5,294
275
275
654
0
73,845

0
0
0
1,000
0
1,000
0
1,719
0
0
212
0
76,351

888,699
965,051
0
0
0
0
0
0
500
500
0
0
500

0
0
500
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0

ACCUMULATION FUND
Investment Profile: Balanced
Growth: 2.96% pa (100% taxable)
Income: 4.72% pa (11.9% Franked)
Opening Value
Transactions (SOP)
> Rollover from Pension
> Rollover To Pension
> Lump Sum Withdrawals
Other Contributions after Tax (SOP)
> Self-employed Contributions
> Non-Concessional Contributions
> less Withheld Contribution Tax
Earnings
Contributions (EOP)
> Govt Co-contribution*
Tax Payable (EOP)
Low Income Super Contribution
Closing Value

*Paul, please note that due to recent changes to Government legislation, you may not be eligible to receive the Government Co-contributions shown above. These contributions will not have
a significant impact on the long term outcomes illustrated in the financial modelling and the associated long-term income and assets graphs (see earlier Projected Key Results section).

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 46 of 69

Page 46 of 69

Superannuation (Pauline)
Date
Age - Paul
Age - Pauline

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

228,952

47,046

73,511

93,532

924

0
198,948
0
14,358
15,715
1,000
0
2,357
1,269
1,493
224
1,314
263
263
162
0
47,046

0
0
0
18,425
20,500
1,000
0
3,075
3,360
3,953
593
5,157
160
160
637
0
73,511

0
0
0
12,900
14,000
1,000
0
2,100
2,645
3,112
467
5,105
0
0
630
0
93,532

211,569
305,100
0
0
0
0
0
0
0
0
0
0
424
424
0
500
924

0
0
924
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

ACCUMULATION FUND
Investment Profile: Balanced
Growth: 2.96% pa (100% taxable)
Income: 4.72% pa (11.9% Franked)
Opening Value
Transactions (SOP)
> Rollover from Pension
> Rollover To Pension
> Lump Sum Withdrawals
Other Contributions after Tax (SOP)
> Salary Sacrifice Contributions
> Personal Contributions
> Spouse Contributions
> less Withheld Contribution Tax
Contributions after Tax (MOP)
> Employer Contributions
> less Withheld Contribution Tax
Earnings
Contributions (EOP)
> Govt Co-contribution
Tax Payable (EOP)
Low Income Super Contribution
Closing Value

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 47 of 69

Page 47 of 69

Assets
Date
Age - Paul
Age - Pauline

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

Business Account
Superannuation
Transition to Retirement Pension

15,000
13,650
775,512

233
29,599
786,618

243
32,898
816,207

250
49,876
839,481

253
68,930
846,944

263
74,845
878,802

266
0
0

273
0
0

284
0
0

296
0
0

Total

804,162

816,451

849,348

889,607

916,126

953,909

965,317

988,581

1,023,231

1,059,110

30,000
44,362
198,948
0
273,310

31,167
65,471
201,797
0
298,435

34,284
86,411
207,290
0
327,985

36,904
0
0
305,100
342,005

37,774
0
0
307,007
344,781

41,551
0
0
315,363
356,915

42,826
0
0
317,936
360,762

45,795
0
0
323,964
369,759

50,374
0
0
332,782
383,157

55,412
0
0
341,840
397,252

76,000
490,000
566,000

73,170
497,625
570,796

109,612
517,530
627,142

112,963
533,354
646,317

129,614
538,381
667,995

136,351
559,916
696,267

138,025
566,788
704,813

148,469
582,503
730,972

155,664
605,803
761,467

162,860
630,035
792,895

1,643,472
1,643,472

1,685,682
1,636,584

1,804,475
1,700,891

1,877,929
1,770,128

1,928,902
1,765,218

2,007,091
1,783,274

2,030,892
1,804,421

2,089,312
1,802,259

2,167,855
1,815,544

2,249,258
1,828,852

Total Assets - Paul

Total Assets - Pauline


CBA Shares
Superannuation
Transition to Retirement Pension
Account Based Pension
Total
Total Assets - Joint
Bank Account
Principal Residence
Total
Grand Total
Grand Total (PV)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 48 of 69

Page 48 of 69

Transition to Retirement and Account Based Pensions (Paul)


Date
Age - Paul
Age - Pauline

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

775,512

786,618

816,207

839,481

846,944

878,802

888,699

0
12,068
12,068
77,551
11,162
907
23,175
786,618

0
31,465
31,465
78,662
29,101
2,364
61,053
816,207

0
24,956
24,956
81,621
23,081
1,875
48,230
839,481

0
7,692
7,692
56,665
7,115
578
15,155
846,944

0
33,878
33,878
84,694
31,333
2,545
65,736
878,802

0
10,786
10,786
87,880
9,976
810
20,684
888,699

888,699
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0

965,051
28,348
26,757
965,051
79
28,269
51,605
988,308

988,308
41,972
39,532
988,308
0
41,972
76,611
1,022,947

1,022,947
43,429
40,918
1,022,947
0
43,429
79,297
1,058,815

1,058,815
44,937
42,353
1,058,815
0
44,937
82,078
1,095,956

Inv Profile: Balanced


ROR: 7.68% pa
Transition to Retirement Pension
Opening Value
Transactions (SOP)
> Rollover to Accumulation Fund
Income Drawdown
> Minimum Withdrawal
> Maximum Withdrawal
> Tax Assessable Drawdown Amount (Taxed)
> Tax Exempt Drawdown Amount
Earnings after Credits
Closing Value
Account Based Pension
Inv Profile: Balanced
ROR: 7.68% pa
Opening Value
Income Drawdown
> Minimum Withdrawal
> Maximum Withdrawal
> Tax Assessable Drawdown Amount (Taxed)
> Tax Exempt Drawdown Amount
Earnings after Credits
Closing Value

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 49 of 69

Page 49 of 69

Transition to Retirement and Account Based Pensions (Paul)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 50 of 69

Page 50 of 69

Transition to Retirement and Account Based Pensions (Pauline)


Date
Age - Paul
Age - Pauline

9 Feb 15
56.3
64.8

1 Jul 15
56.7
65.2

1 Jul 16
57.7
66.2

6 Apr 17
58.5
67.0

1 Jul 17
58.7
67.2

1 Jul 18
59.7
68.2

21 Oct 18
60.0
68.5

1 Jul 19
60.7
69.2

1 Jul 20
61.7
70.2

1 Jul 21
62.7
71.2

198,948

201,797

207,290

211,569

0
3,096
3,096
19,895
3,096
5,945
201,797

0
10,090
10,090
201,797
10,090
15,583
207,290

0
7,922
7,922
207,290
7,922
12,201
211,569

211,569
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

305,100
3,594
3,594
305,100
3,594
5,501
307,007

307,007
15,350
15,350
307,007
15,350
23,707
315,363

315,363
4,838
4,838
315,363
4,838
7,411
317,936

317,936
10,930
10,930
310,525
10,930
16,958
323,964

323,964
16,198
16,198
323,964
16,198
25,016
332,782

332,782
16,639
16,639
332,782
16,639
25,697
341,840

341,840
17,092
17,092
341,840
17,092
26,397
351,145

Inv Profile: Balanced


ROR: 7.68% pa
Transition to Retirement Pension
Opening Value
Transactions (SOP)
> Rollover to Accumulation Fund
Income Drawdown
> Minimum Withdrawal
> Maximum Withdrawal
> Tax Exempt Drawdown Amount
Earnings after Credits
Closing Value
Account Based Pension
Opening Value
Income Drawdown
> Minimum Withdrawal
> Maximum Withdrawal
> Tax Exempt Drawdown Amount
Earnings after Credits
Closing Value

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 51 of 69

Page 51 of 69

Transition to Retirement and Account Based Pensions (Pauline)

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 52 of 69

Page 52 of 69

APPENDIX
These appendices provide more technical detail to the subjects that have been referred to within
this Statement of Advice. They are included to give you more detail about the topics discussed. They
are not intended to be comprehensive in the information that you may require. You should seek
professional advice from your taxation and/or legal adviser, Centrelink or the relevant Government
authorities.

The Investment Asset Classes


In deciding the appropriate mix of assets that will form your investment portfolio you can choose
from four broad classes of asset:

Cash Considered the safest asset class, cash funds are available at short notice and have
low risk of capital loss. The cost of this low level of risk is that cash funds generally offer
very low rates of return with no tax benefits.

Fixed Interest Although a range of fixed interest securities are available most have the
same core characteristics, including a fixed investment term, regular interest payments
(higher than cash funds) and a low level of capital loss.

Property Considered to be a growth asset due to higher long term returns, property
investments can provide a combination of income (via rental payments) and capital growth
(via increases in property values).

Shares Provide investors with part ownership of a company and the associated benefits (eg
dividend income, share price increases) and risks (eg capital volatility, economic downturns).

The table below compares the returns of each of the above asset classes, and demonstrates the
volatility of returns:

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 53 of 69

The Risk/Return Trade Off


One of the central concepts of investment theory is that there is a positive relationship between the
level of risk of an investment and its expected level of return i.e. the higher the risk the higher the
expected return, and vice versa. Although logically most investors would prefer low risk, the
risk/return trade off would limit the potential for higher returns.
Although some asset classes (particularly shares and property) can demonstrate significant volatility
over the short term, history has shown that over the long term these fluctuations can be smoothed
out and higher returns can be generated by implementing two main strategies: diversifying your
funds across and within a range of different investments, and recognising that different investments
have different time frames.
There are a variety of risks associated with investing, including the following:

Mismatch risk the chosen investment may not be suitable for your needs, goals and
circumstances

Inflation risk the real purchasing power of your invested funds may not keep pace with
inflation

Reinvestment risk if you rely on fixed rate investments you may have to reinvest maturing
money at a lower rate of interest

Market risk movements in the market mean the value of your investment can go down as
well as up and sometimes suddenly

Timing risk trying to time entry to and exit from markets can expose you to potentially
greater short-term volatility

Risk of not diversifying if you put all of your capital into one market a fall in that market
will adversely affect all of your capital

Liquidity risk you may not be able to access your money as quickly as you need to without
suffering a fall in value

Credit risk the institution you have invested with may not be able to make the required
interest payments or repay your funds

Legislative risk your investment strategies or products could be affected by changes in


current laws and regulations

Value risk you may pay too much for the investment or sell it too cheaply

Manager risk the personnel or ownership of the fund manager may change so that the
manager no longer has access to the skills or attitudes that contributed to earlier
performance levels

Currency risk investments in assets located in other countries may rise or fall in value due
to the relative value of the Australian currency.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 54 of 69

GENERAL INFORMATION
Superannuation - Introduction
Superannuation is a tax effective vehicle for accumulating wealth for your retirement.
Superannuation investments are eligible for special tax concessions that are not available to other
types of investments.
Benefits you should be aware of when considering investing in the superannuation environment are:
You receive significant tax concessions on your investment earnings. Income and
capital gains derived from your superannuation investments are taxed at a
maximum rate of 15% (capital gains are taxed at 10% where investments have been
held for longer than one year).
You can add to your investment on a regular basis.
You may be eligible to receive a tax deduction for your superannuation
contributions.
Your access to your superannuation capital is restricted. Your superannuation
capital can only be accessed once you meet a condition of release (this generally
occurs at retirement after preservation age or at age 65). However, there is also an
opportunity to access your superannuation benefits prior to retirement via a
Transition to Retirement strategy.
Your superannuation benefits can be used to commence a tax effective income
stream in retirement.

Superannuation Guarantee Contributions (SGC)


The Superannuation Guarantee (SG) is a Commonwealth Government program that has applied
from 1 July 1992. The program requires all employers to make minimum contributions to a
complying superannuation fund for their employees. An employer includes the public and private
sector, tax exempt organisations and family companies or trusts if they pay salary or wages.
The current annual rate of SGC is equal to 9.5% of Ordinary Time Earnings (required to be paid at
least quarterly). The maximum level of salary used to calculate SG is $197,720 for the financial year
2014/15, equating to maximum compulsory contributions of $18,783.40 per annum.
Employers have 28 days after the end of the quarter to pay the required SG amount for employees,
if they do not do so, then they are required to pay the Superannuation Guarantee Charge (SGC).

Salary Sacrifice
Salary Sacrificing involves establishing an arrangement with your employer where you forego pre-tax
salary income to make additional contributions to superannuation. The contributions are taxed at
15% when entering your superannuation fund compared with being taxed at your marginal tax rate.
Salary sacrifice contributions are classified as Concessional Contributions. Concessional
Contributions are currently limited to $30,000 per annum for those under 50 years of age and
$35,000 for those over age 50 on the last day of the financial year. This amount includes any
Superannuation Guarantee payments made by your employer.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 55 of 69

Government Co-contribution
In order to qualify for the Government co-contribution, there are three tests that must be met to
qualify:

the work test,

the income test and

the age test


Work Test
To be eligible for the work test you must earn 10% or more of your income from eligible
employment, or from carrying on a business.
In addition to this work test, those aged 65 or over but under age 71, will need to meet a second
work test. They must be gainfully employed for at least 40 hours in a period of not more than a 30
consecutive days, in the financial year that you make a contribution.
Income Test
To be eligible for the co-contribution your total income must be less than $49,488 for the 2014/15
financial year and you must make an eligible personal contribution to superannuation in that year.
For co-contribution purposes, total income is equal to assessable income plus reportable employer
superannuation contributions (eg salary sacrifice) plus reportable fringe benefits such as a car. It
also includes any net capital gains from shares and property.
Where your total income is less than $34,488 (2014/15) in a financial year, the government will
contribute 50 cents for every $1 of non-concessional contributions (after tax) you make up to a
maximum of $500. The co-contribution reduces by 3.333 cents for each dollar for incomes above
$34,488, and the entitlement ceases once your total income reaches $49,488 per annum.
By way of example, if you earn $40,000 total income and make an after tax super contribution of
$1,000 then you will receive a co-contribution of $284.
Age Test
You must be less than 71 years of age on the last day of the financial year.
You do not need to claim for the co-contribution as the ATO will work out if you are entitled based
on the information from your superannuation fund and your tax return.
The benefits of this recommendation are:
You will boost your superannuation savings with no additional cost incurred by yourself.
No contribution tax will apply as no tax deduction will be claimed for the contribution.
The co-contribution is treated as a Non-Concessional contribution which has favourable tax
concessions.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 56 of 69

Non-Concessional Contribution
A Non-Concessional Contribution is a contribution made to your superannuation fund for which a tax
deduction is not claimed.
Non-concessional contributions do not attract a contributions tax when entering your
superannuation fund and are received tax free when withdrawn or used to commence an income
stream.
Non-Concessional Contributions do not include:

Government Co-Contributions

Contributions relating to personal injury payments

Contributions from the disposal of small business assets (up to $1.1 million indexed as at 1 July
2009)

Contributions paid out as a super benefit in the same year that they are contributed as an
untaxed element (this would generally apply to untaxed schemes)

Roll-over superannuation benefit

Amounts that are specifically excluded from a fund's assessable income because they are
included in the Concessional Contributions cap.

Contributions made directly by a taxpayer into their spouse's account as these will be counted
against the receiving spouse's Non-Concessional Contribution cap.

Non-Concessional Contributions are capped at $180,000 a year. Individuals aged less than 65 at any
time during the financial year can contribute up to $540,000 by bringing forward two years of
contributions.
Contributions in excess of the cap are taxed at 46.5% (including Medicare levy).

Withdrawal & Re-contribution


A withdrawal and re-contribution strategy involves recycling the make-up of the superannuation
components within a fund prior to the commencement of an income stream in order to maximise
the tax free component. The strategy minimises the tax payable on an income stream where you are
less than 60 and can also assist in minimising tax payable by your estate.
Increasing the tax free component of the fund achieves two major benefits:
Improved tax effectiveness of income streams for those aged between 55-59 years of age. Part
of the income stream which would previously have been taxable will be received tax free as a
result of the strategy.
In the event of death, a higher tax free amount reduces the tax payable on lump sums received
by non-dependant beneficiaries (such as adult children). The taxable component of a death
benefit is taxed at 16.5% when received by non-dependants, compared to nil tax on the tax free
component.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 57 of 69

Taxation of Super Withdrawal


When part of a superannuation benefit is paid out as a lump sum (or as an income stream) it will
include both a tax-free and taxable component, with the relevant portions of each reflecting the
proportions such components make up the total value of the superannuation benefit.
For lump sum superannuation benefits, the tax-free and taxable components are worked out based
on the value of the superannuation interest just before the lump sum is paid.
For pensions, the tax-free and taxable components are determined on the value of the
superannuation amount at the time that the income stream is created.
Age

Taxation (includes Medicare levy)

Element taxed in the fund


Below preservation age

Taxable component subject to 22%

Over preservation age but less than 60

Nil tax up to low rate cap of $185,000; then


17% on balance above $185,000

60 and over

Tax free

Element untaxed in the fund


Below preservation age

32% up to untaxed plan cap amount of $1,355,000; then


49% on amount above cap

Over preservation age but less than 60

17% up to low rate cap amount of $185,000; then


32% between $185,001 and untaxed plan cap of $1,355,000,
then
49% on amount above the untaxed plan cap

60 and over

17% up to the untaxed cap amount of $1,355,000per


superannuation plan; then
49% on amounts above the cap

Preservation
Generally, when making a contribution to super your funds become preserved, meaning you cant
access the funds.
Preserved monies are required to be held within the superannuation environment until:
You retire after reaching preservation age. If less than 60 years of age, a condition of release is only
met where the trustee is satisfied you have no intention to ever again become gainfully employed
(you need to make a declaration to this effect).
You cease an employment arrangement after reaching 60 years of age (including changing from one
employment contract to another)
The preservation age differs according to when you were born, as shown in the following table:
Year born

Preservation age

Before 1 July 1960

55

1 July 1960 30 June 1961

56

1 July 1961 30 June 1962

57

1 July 1962 30 June 1963

58

1 July 1963 30 June 1964

59

After 1 July 1964

60

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 58 of 69

Once preservation age is reached, members also have the option of accessing their preserved
superannuation monies via a non-commutable income stream prior to meeting a condition of
release.
There are other conditions of release that cater for total and permanent disablement and financial
hardship, which are not aged based and may allow earlier release of superannuation benefits.

Transition to Retirement
Transition to Retirement refers to the opportunity for people who have reached their preservation
age to continue working on a part-time or full time basis and supplement their salary with a regular
income from their superannuation savings via a non-commutable income stream
Transition to Retirement strategies provide the following opportunities:
You can increase your income prior to retirement.
You can reduce your hours of work and receive a similar level of income.
You can reduce your tax payable prior to retirement.
You can increase your retirement savings.
You can move your superannuation assets into the pension phase where earnings are tax free
(compared with paying a tax of up to 15% within the accumulation phase).

Salary Sacrifice
Salary Sacrificing involves foregoing salary income and making pre-tax contributions through an
arrangement with your employer, thereby reducing the amount of tax payable on your income.
The benefit from Salary Sacrifice comes from the difference between the income tax that would
have been paid on the income amount, and the rate of tax (either contributions tax or fringe
benefits tax) payable on the item under the Salary Sacrifice arrangement.
Concessionally taxed contributions to superannuation are currently limited to $30,000 per annum
for those under 49 years of age and $35,000 for those over age 50 on the last day of the financial
year. This amount includes any Superannuation Guarantee payments made by your employer.
Where the ATO identifies that a persons concessional contributions have exceeded the cap, the
amount in excess will be taxed at the persons marginal tax rate, plus a Government interest charge.

Transition to Retirement Pension (TRP)


A TRP is an Account Based Pension that has been commenced using the Transition to Retirement
provisions. In conjunction with the recommended Salary Sacrifice strategy we recommend you
commence a TRP in order to supplement your reduction in salary.
A minimum income limit applies to TRP payments which is equal to 4% (for the 2014/15 financial
year) of the account balance up to age 65. A maximum limit equal to 10% of the account balance
also applies.
Account Based Pension payments are tax free for individuals over 60 years of age and do not have to
be included in tax returns.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 59 of 69

Payments made to individuals less than 60 years of age are taxable but receive tax concessions. The
pension drawn, less any tax free amount, is taxed at your marginal tax rate. A 15% tax rebate applies
to the difference, which is taxable income. The tax rebate can be used to reduce an income tax
liability arising from this pension as well as other income sources.
When you retire or reach 65 years of age your TRP becomes unrestricted non preserved, meaning
you can access your capital (the income stream in no longer non-commutable).
The benefits of commencing a Transition to Retirement Pension are:
The income received from your TRP will assist in meeting your cost of living requirements.
Pension payments are tax effective.
Your Account Based Pension fund pays no tax on earnings or capital gains on investments in the fund
(based on current legislation).
You have the flexibility to adjust your pension payment between the minimum and maximum limits.
Upon rollover of your accumulated superannuation benefits to an Account Based Pension, there is
generally no lump sum tax payable.
The pension is paid as regularly as you require to enable you to manage your cashflow, eg: monthly,
quarterly, half yearly or annually and can be credited to your nominated bank account, building
society, credit union or paid to you by cheque.
The risks associated with commencing a Transition to Retirement Pension are:
If the income drawn from your TRP exceeds the level of superannuation contributions you will
accelerate the depletion of your retirement capital.
You are restricted from making commutations from your TRP. There are however exceptions which
include, but are not limited to, the following:
Unrestricted Non Preserved funds can be accessed.
Capital is being rolled back into the accumulation phase.
You meet a full condition of release (this will be achieved at retirement).
You use the proceeds to purchase another non-commutable income stream.

Account Based Pension


An Account Based Pension is purchased with superannuation monies and is designed to provide you
with a regular, flexible, tax effective income stream in retirement. Account Based Pension balances
increase with positive investment returns and decrease with pension payments, negative
investments returns and fees.
Earnings from the underlying portfolio of your Account Based Pension are tax free, making Account
Based Pensions a very tax effective retirement structure.
From the 2013/2014 financial year, the minimum pension payment factors return to normal (see
table below) after the government allowed a reduction in the drawdown pension payment for
previous years.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 60 of 69

Age

Original Percentage of Account


Balance

Drawdown Percentage for


2013/14 Onward

55 64

4%

4%

65 74

5%

5%

75 79

6%

6%

80 84

7%

7%

85 89

9%

9%

90 94

11%

11%

95+

14%

14%

* Minimum pension payments are calculated annually (as at 1 July).

Account Based Pension payments are tax free for individuals over 60 years of age and do not have to
be included in tax returns.
Payments made to individuals less than 60 years of age are taxable but receive tax concessions. The
pension drawn, less any tax free amount, is taxed at your marginal tax rate. A 15% tax rebate applies
to the difference, which is taxable income. The tax rebate can be used to reduce an income tax
liability arising from this pension as well as other income sources.

The benefits of commencing an Account Based Pension are:

You receive a regular income stream to assist in meeting your retirement income needs.

You receive tax concessions on your Account Based Pension income via a tax deductible amount
and a 15% tax offset prior to age 60. Once you reach 60 years of age your pension payments will
be tax free.

You can choose the frequency of your pension payments (e.g. monthly, quarterly, half yearly or
annually) and payments can be credited to your nominated bank account or paid to you by
cheque.

Your Account Based Pension fund pays no tax on income or capital gains generated within the
fund.

Upon rollover of your superannuation benefits to an Account Based Pension, there is generally
no lump sum tax payable.

Your Account Based Pension portfolio will be invested in accordance with your risk profile. This
would not be possible through non-account based retirement income streams such as Annuities.

You have the option of nominating a reversionary beneficiary (usually a spouse) who will receive
the pension in the event of death.

The risks associated with this recommendation are:

There is no guarantee you will receive income from your Account Based Pension for your
lifetime.

The account balance of your Account Based Pension may reduce to a level which is insufficient
to meet your income needs later in life, depending upon the performance of the underlying
investments and the level of income and capital you draw over time.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 61 of 69

Age Pension
The Age Pension is a government support payment which assists Australian residents to achieve an
adequate level of income when they reach Age Pension age. The amount payable is based on your
age, home ownership and marital status as well as the Income and Assets tests.
To qualify for the Age Pension the following requirements must be met:

You must be of Age Pension age.

The qualifying age for both male and female is 65.


The qualifying age for the Age Pension will increase for both men and women born on or after 1 July
1952:

People born between

Eligible age for Age Pension

1 July 1952 and 31 December 1953

65

1 January 1954 and 30 June 1955

66

1 July 1955 and 31 December 1956

66

1 January 1957 and later

67

Your income and assets are tested against minimum and maximum limits.

Under the Income test, a couples combined income from all sources (including income from
overseas)is used and applied against the Income test formulas to determine a rate of payment.
The Income test thresholds are outlined below.
Shade out threshold
(per fortnight)
$

Cut out threshold


(per fortnight)
$

Single

$160.00

$1,868.60

Couple (combined)

$284.00

$2,860.00

$284.00

$3,701.20

Illness
separated
combined)

(couple

The shade out threshold is the maximum assessable income from other sources where a
pensioner remains entitled to the full pension. The pension reduces by 50c for each dollar of
assessable income for a single person and 25c for each dollar of assessable income for couples
earning in excess of the shade out threshold.
The cut out threshold is the level of assessable income at which there is no entitlement to a
pension.
Note: The amount of income you can earn before your payment reduces to $0 may be higher if
you are eligible for Rent Assistance.
Under the Assets test, a person may own a certain level of assessable assets (including overseas
assets) before their pension is reduced. The value of a persons home is an exempt asset.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 62 of 69

The Asset test thresholds are outlined below:


Shade out threshold
$

Cut out threshold


$

Homeowner
Single

$202,000

$771,750

Couple

$286,500

$1,145,500

$286,500

$1,426,000

Single

$348,500

$918,250

Couple

$433,000

$1,292,000

$433,000

$1,572,500

Illness
Separated
combined)

(couple

Non-Homeowner

Illness
Separated
combined)

(couple

The shade out threshold is the maximum assessable assets where a pensioner remains entitled
to the full pension. The pension reduces by $1.50 per fortnight (single person or couple
combined) for each $1,000 of assessable assets in excess of the shade out threshold.
The cut out threshold is the level of assessable assets at which there is no entitlement to a
pension.
Both the Income and the Assets test are calculated to determine a rate of payment. The one that
results in the lowest amount of benefit is applied.
The current rates of pension are outlined below:
Maximum pension rates
(per fortnight)
$
Single

$776.70

Couple (each)

$585.50

Illness Separated Couple (each)

$776.70

The above payments exclude the pension supplement.

Centrelink Concession Cards


Commonwealth Seniors Health Card
The Commonwealth Seniors Health Card (CSHC) provides non-pensioners of Age Pension age access
to concessionally priced prescription medicines provided through the Pharmaceutical Benefits
Scheme (PBS).
The CSHC is not assets tested but is subject to an income test, as follows:
Family situation

Adjusted Taxable Income limit

Single

$51,500

Couple (combined)

$82,400

Couple, illness separated (combined)

$103,000

For each child, add

$639.60

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 63 of 69

You may also be entitled to extra concessions from state and local government authorities.
Concessions from state and local government authorities may include:

Reductions in property and water rates.

Reductions in energy bills.

Quarterly Telephone Allowance.

Reduced fares on public transport.

Reductions on motor vehicle registration.

One or more free rail journeys within the state each year.

Pensioner Concession Card (PCC)


The Pensioner Concession Card (PCC) is issued to all recipients of Centrelink pensions (including the
Age Pension and the Disability Support Pension) as well as recipients of some Centrelink allowances.
Holders of the PCC receive the following concessions:

Free mail redirection from Australia Post when changing address.

Quarterly Telephone Allowance.

Free eyesight test from optometrists who bulk bill Medicare.

Hearing aids through the Commonwealth Hearing Services Program.

Reduced cost medicines through the Pharmaceutical Benefits Scheme.

Various state and local government concessions, including reduced property and water
rates, reduced energy bills, reduced public transport costs and reduced motor vehicle
registration charges.

Health Care Card


The Health Care Card (HCC) provides access to concessionally priced prescription medicines provided
through the Pharmaceutical Benefits Scheme (PBS).
In addition, holders of the HCC may receive other benefits such as reduced health care costs
(including ambulance, dental care and eye care), reduced public transport costs, reduced water rates
and reduced energy bills. These extra concessions are provided by state and local government
authorities so will vary from state to state.
The HCC is not assets tested but is subject to an income test, as follows:
Family situation

Average weekly income for 8


weeks previous to applying

Total Income in an 8 week period

Single

$524.00

$4,192.00

Couple (combined)

$906.00

$7,248.00

Single, or couple combined,


with 1 child

$906.00

$7,248.00

For each additional child, add

$34.00

$272.00

The HCC is automatically issued to recipients of certain Centrelink benefits irrespective of income
levels, including Newstart Allowance, Partner Allowance, maximum rate Family Tax Benefit (A) and
Parenting Payment.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 64 of 69

Estate Planning
Estate planning is the planning and documentation of your wishes for the distribution of your wealth
following death, including assets you own personally as well as assets you control.
Estate planning is a specialist area and it is therefore important you obtain professional legal advice
in relation to all areas of your estate plan. However we outline below some of the issues you should
consider in designing your estate plan.

Wills
A Will is the first step in ensuring the distribution of your estate is actioned in accordance with your
wishes. Without a Will upon your death a court controls the distribution of your estate and the
persons to whom your estate is distributed to, which may result in delays in asset distribution.
It is important to ensure that your Will:

Nominates executors (and successor executors) for your estate who are likely to
survive you and who clearly understand your wishes.

Nominates beneficiaries in relation to the whole or part of your estate and nominates
second choice beneficiaries, should your first choice predecease you.

Bequeaths monetary value or a percentage of your estate rather than a specific asset,
as there is the risk that an asset may not be in existence at the time of distribution of the
estate.

Nominates assets to be held in Trust for beneficiaries under 18 years of age. For
example you can provide funds for your childrens or grandchildrens education.

Power of Attorney
This element of your estate plan is designed to be implemented prior to your death so that your
affairs can be conducted appropriately.
There are three types of Power of Attorney:
1. General Power of Attorney
A general Power of Attorney appoints another party to act on your behalf to make decisions in
respect of your legal and financial affairs. Subject to its terms, such a document remains in force
until you cancel it. However, a general Power of Attorney is automatically terminated when you die,
become bankrupt or, become incapable of making reasonable judgments due to disability.
2. Enduring Power of Attorney
In contrast, an enduring Power of Attorney is not terminated if you become legally incapable of
making your own decisions due to disability. Therefore, this type of document is particularly
important if you were to lose mental capacity and required someone else to manage your affairs.
Without an attorney, your family would have to apply to a State authority to have an administrator
appointed to manage your affairs. This may mean that your assets are frozen for a lengthy period of
time and that the subsequent decisions about them may not accord with your familys overall best
interests and wishes.
In granting an enduring Power of Attorney, you are giving wide powers to another person to act
unfettered on your behalf. In essence, your attorney can conduct any legal and financial affairs that
you can. It is essential, therefore, that you take great care in choosing your attorney and that you
choose someone you implicitly trust to act in your best interests.
Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 65 of 69

3. Enduring Power of Guardianship


An enduring Power of Guardianship allows someone to make personal and lifestyle decisions for
you, which is also not terminated if you become legally incapable of making your own decisions due
to disability. You can nominate the types of personal and lifestyle functions in respect of which your
guardian will have the power to make decisions on your behalf, ie. determining your place of
residence
A Power of Attorney may only be granted by someone who is over the age of 18 and who is of sound
mind at the time of the grant and capable of fully understanding the nature and purpose of the
document they are signing. The attorney is not able to do anything illegal while operating under a
Power of Attorney, nor are they able to prepare a Will on behalf of the donor or transfer the Power
of Attorney to someone else unless specified.

Super Death Benefit Nominations


Death benefits are funds paid upon death by the Trustee of your superannuation fund to your estate
or to the beneficiary you have nominated. When nominating a beneficiary it is important you
understand that there are implications for each choice you make, including the type of nominations
that you make.
There are two types of nominations for beneficiaries: binding and non-binding.

Non-Binding Nominations
Many death benefit nominations made by members of superannuation funds are not binding on the
superannuation fund trustee. This means that the trustee of the super fund may exercise a
discretionary power to determine how the benefit is distributed and to whom.

Binding Nominations
Nominations may also be binding subject to the rules of the trust deed. Recently the Superannuation
Industry (Supervision) Regulations were amended so that trustees may, subject to the deed, accept
binding nominations. A death benefit will be binding on the trustees if:

The nomination form includes the name of each person(s), or class(es) of person (e.g.
spouse), and the allocation of the death benefit amongst nominees is clear;

Each death benefit nominee is a legal personal representative or dependant of the


member;

The nomination form is dated and signed by the member in the presence of two adult
witnesses, neither of whom is a nominee named in the notice;

The nomination form contains a declaration by the witnesses, stating that the member
has signed and dated the nomination form in their presence; and

The nomination is valid.

The nomination is only valid for 3 years, therefore a new nomination form needs to be provided to
the trustee every 3 years to ensure that your nomination is valid. You may also change your
nomination anytime within the 3 year period. It would be prudent for you to ensure that your
nomination is updated.

Regular Review
It is important to review death benefit nominations regularly and to include full details of your
beneficiaries including their relationship to you, their full name and their address.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 66 of 69

Keeping you superfund trustee informed of any changes to your beneficiaries or changes to their
personal details will make the task of distributing your super much less complex for all involved.
Death benefits will have tax implications for the receiving beneficiary, so you should discuss your
intentions with your solicitor. You can then ensure your Will fully reflects your intentions as well as
make an informed decision on whether to make binding or non-binding nominations.

Estate Planning Super Death Benefits


Who gets your superannuation when you die?
Strict rules govern how your super is distributed when you die and its important to follow those
rules to make sure your money goes to whom you want.
One of the most important decisions you make when you join a super fund has nothing at all to do
with investment. It revolves around the question of who to nominate as the beneficiaries of your
super when you die.
Its a critical question because if you dont get it right your savings could be given to someone
other than your preferred beneficiaries.

Few Exceptions
When a fund member dies, subject to the trust deed, his or her superannuation may only be paid to:

The members spouse

The members children

A person who is financially dependent on the member

A person with whom the member has an interdependency relationship

The members estate

The beneficiaries you nominate when you join a fund are only a guide, meaning the trustees of your
fund will have the ultimate discretion as to who will receive your super. They will take into
consideration any nomination of beneficiaries that you have made, but are not bound by your
request.
The only exception is where your super fund allows you to make a "binding death benefit
nomination". This is a nomination that the trustees are obliged to follow. You may only nominate a
spouse, child, financial dependant, or your estate as a beneficiary.
If you want someone else, such as a friend or a charity, to receive your savings, you should consider
nominating your estate as the preferred beneficiary of your superannuation entitlements.
Your super will then be distributed according to the terms of your Will. You will need to nominate
the non-dependants as beneficiaries of your Will.

Definition of Dependant under Superannuation Law


A dependant for superannuation purposes is:

The members spouse including de-facto partners but does not include previous spouse.

The members children including adopted children, step-children and children born outside
marriage.

Any person who was financially dependent on the deceased at the date of death; and

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 67 of 69

A person with whom the member has an interdependency relationship (s.10A of the SIS
Act).

An interdependency relationship is defined as one between two persons (whether or not


related by family) where:

They have a close personal relationship; and

They live together; and

One or each of them provides the other with financial support; and

One or each of them provides the other with domestic support and personal care.

Pension or Lump Sum?


Depending on the terms of the deed, members may be able to specify whether beneficiaries are to
receive a pension or a lump sum. The member may be able to specify that their spouse, children, or
financial dependants are to receive a pension. They may also be able to nominate a combination of a
lump sum payment and pension payment for each beneficiary.
If the deed doesnt provide for binding death benefit nominations, the form of payment will be at
the discretion of the trustees. The trustees may consult the beneficiaries before deciding on the
form of payment.
Superannuation law allows for death benefits to be paid in any or all of the following methods:

As a lump sum to the members spouse.

As a lump sum to the members children (both adult and minor children).

As a lump sum to any person who is financially dependent on the member at the date of
his/her death.

As a lump sum to a person with whom the member has an interdependency relationship at
the date of his/her death.

As a pension to any of the above persons. However, in the case of a dependent child, when
the child turns 25 the balance in the fund will have to be paid as lump sum (tax free) unless
the child is permanently disabled.

As a lump sum to the deceased persons estate.

A pension is not able to be reverted to a non-dependant on death. Death benefit payments to nondependants have to be made as a lump sum.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 68 of 69

Taxation of Super Death Benefits


The tax arrangements that apply to the payment of superannuation death benefits are summarised
in the table below.
Age of deceased
Super death benefit
Age of recipient
Superannuation death benefit paid to dependants
Any age
Lump sum
Any age

Taxation on taxable component


Tax free

Aged 60 and over

Income stream

Any age

Taxed element - tax free


Untaxed element - marginal tax
rates with a 10% tax offset

Below age 60

Income stream

Aged 60 and above

Taxed element - tax free


Untaxed element - marginal tax
rate with 10% offset

Under age 60

Taxed element - marginal tax rate


with 15% tax offset
Untaxed element - marginal tax
rate

Superannuation death benefit paid to non-dependants


Any age
Lump sum
Any age
Any age

Income stream

Any age

Taxable component - 15% tax rate


Untaxed element -30%
Not applicable, however income
streams commenced prior to 1
July 2007 will be taxed as if
received by a dependant

* Medicare levy also applies, where applicable. Tax free component is tax free.

Statement of Advice for Mr Paul & Mrs Pauline Xuereb

Page 69 of 69