Ta x , Super+You. Take Control.
Years 7-12 Super Activity 1 WHAT IS
SUPERANNUATION?Fact sheet
WHAT IS SUPER? The materials in Super have been designed to be used in a variety of ways. Each topic is designed as a stand-alone Have you ever saved up to buy something? Maybe you are section to be explored by a whole class, small groups or putting money aside at the moment to buy a car or something individual students that is important to you. Superannuation, often called super, is money you set aside during your working life to provide an income to live on when you retire from work. Most people start to contribute to super when they begin work and keep contributing Currently until they retire. The money is invested in one or more super there are five people funds of your choice. of working age for every You must leave your super in your fund until you either reach a person aged 65 and over but by minimum age or meet strict requirements set by the government. 2047 that will reduce to Your super is invested in assets such as bank accounts, property just 2.4 or shares, which earn an income. This income is reinvested in your super fund and then earns more income. This process, where you can generate earnings from previous earnings, is called compounding and greatly increases your final super payout.
The government encourages super savings by offering tax concessions that are not available with other forms of saving. In addition, no tax is charged for most people when they retire at 60 or older and take their super as a regular pension or a lump sum.
WHY IS SUPER IMPORTANT TO ME?
Super is important for you because the more super you accumulate during your working life, the higher your standard of living will be in retirement. In general, most Australians would like to have a higher income in retir than that offered by the government age pension. Over time, the age pension will provide a basic safety net ementfor older Australians, which will be supplemented or even replaced by the income generated from superannuation.
Demographic changes and greater life expectancy have increased the pr oportion of the Australian population in the retirement age group. Currently there are five people of working age for every person aged 65 and over b that will reduce to just 2.4. The demand for government pensions and services will increase, and the numberut by of 2047 people in the working age groups will fall. There will be significantly less people in the workforce contributing thr taxes to government revenue and there will be a higher demand for government services. ough
Page 1 Ta x , Super+You. Take Control. HOW MUCH SUPER DO I NEED?
Australians are living longer, so we will need more super savings to support ourselves for that longer period after retirement. Life expectancy in Australia is currently 84.5 years for women and 80.4 years for men. (Australian Bureau of Statistics, 3302.0.55.001 - Deaths, Australia, 2015). The Association of Superannuation Funds of Australia (ASFA) Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation and provides estimates of what singles and couples would need to spend to support their chosen lifestyle. This standard has been calculated for two income levels – a 'modest' basic lifestyle and a 'comfortable' lifestyle. The income required for these lifestyles as at December 2016 is shown in Table 1. Both budgets assume that the retirees own their own home outright and are relatively healthy.
Budgets for various households and living standards for those aged around 65 (December quarter 2016, national) Modest lifestyle Comfortable lifestyle
Single Couple Single Couple Total per year $24,108 $34,687 $43,538 $59,808
Source: ASFA accessed at: www.superannuation.asn.au/resources/retirement-standard
Budgets for various households and living standards for those aged around 85 (December quarter 2016, national) Modest lifestyle Comfortable lifestyle
Single Couple Single Couple Total per year $23,603 $34,992 $39,171 $54,960
Source: ASFA accessed at: www.superannuation.asn.au/resources/retirement-standard
THE GROWTH OF SUPER IN AUSTRALIA
The system of saving through super has existed in Australia for a long time.
Before 1970 super was generally limited to a minority of workers, such as higher paid white collar staff, public servants and members of the Defence Forces. From the 1970s super became more widely available as more industrial awards started to include superannuation clauses. From 1986 the Conciliation and Arbitration Commission approved industrial agreements that provided for contributions of up to 3% of wages and salaries to be put into approved super funds. By the early 1990s, 79% of employees had super coverage, including 68% of private sector employees. The government introduced the superannuation guarantee system in July 1992 to address issues with some employees having no super and some employers not complying fully with the legislation. This extended employee coverage and made it possible for employer contributions to be increased over time. By 2002–03 the contribution rate reached 9%. Despite the exceptions to the super I'm young. Why do I guarantee scheme (see How super works for more details) recent years have seen think of retirement widespread super contributions among the working population. now? On 1 July 2014 the super guarantee was increased to 9.5%.
The Australian Bankers' Association (ABA), the Financial Planning Association (FPA) and the Investment and Financial Services Association (IFSA) have produced a guide called Smarter Super – Invest in your future and make the most of your retirement (www.smartersuper.com.au/pdf-content.html), which provides information on investing for your future and retirement.
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superannuation? Years 7-10 SuperTASK Activity 1 1: What is SUPER IS SO WHY Worksheet YOU WILL: YOU WILL NEED:
interpret data to identify trends in relation to age and life Fact sheet: What is superannuation? expectancy predict future trends in relation to life expectancy make a judgment on the impact of Australia’s demographic profile on your own retirement develop a persuasive speech INTERPRET DATA TO IDENTIFY TRENDS
1. Review Figure 1 and identify trends in relation to the proportion of the population of 65 years of age over time (including projections into the future).
2. Review Figure 2 and identify trends in life expectancy in the last 30 years.
3. Based on these trends, predict the changes to life expectancy in the next 50 years.
4. Explain how you think Australia’s ageing population and longer life expectancy will affect your chances of receiving an age- pension when you retire. Use statistics and your predictions to justify your decision.
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Figure 1: Australia’s population 65 and over, at 30 June (over time)
Figure 2: Life expectancy at birth – 1985-2015
DEVELOP A PERSUASIVE TEXT
5. In 1992, the Australia Government introduced a superannuation guarantee system to ensure that all working Australians had savings for their retirement. You have been asked to develop a short speech to persuade an audience of young people entering the workforce about why this was an important initiative. When developing your speech, use information in the Fact Sheet and the data in Figure 1 and Figure 2. In developing your speech, consider what would happen to your generation at retirement if saving for retirement through the superannuation guarantee did not exist.
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Guidelines for your persuasive speech Use a Simple Structure – Have a clear beginning, middle and end to your speech and focus on key messages.
Know Your Audience – The most important aspect of creating a powerful speech is addressing who will be hearing it.
Use Creative, Visual Language – Use rhetorical questions (such as ‘Can you imagine a life with no money?) that will intrigue the audience. Use statistics to convince them. Choose words that give them the message you are conveying.
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superannuation? Years 7-10 SuperTASK Activity 2 1: What is SUPER IS SO WHAT Worksheet YOU WILL: YOU WILL NEED:
make decisions on how you will budget if you have not Fact sheet: What is superannuation? saved enough for a modest retirement reflect on the consequences of not saving for retirement and consider action that you might take to avoid these
Scenario You have reached the age of retirement and have had an interrupted working life, so there were times when no contributions were being made to your superannuation fund. Because of this, and the fact that you did not make any voluntary contributions to your superannuation, you have less saved for retirement than you would like. You are single and your superannuation will provide you with an annual income of $14,000 a year, considerably less than the ASFA predicts you need for a modest lifestyle. Imagine there is no age-pension.
You have less money than you need to live modestly in retirement. You will have to spend less money and make choices about what not to spend money on. What will you spend less money on? Will there be items you forgo completely? These are decisions you will have to make if you do not save enough for retirement through superannuation.
MAKE DECISIONS OR TRADE-OFFS
1. Make decisions on what you will spend your money on in retirement by completing the blank column in Table 1. This table, developed by ASFA, benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. You may have a zero entry against some items, or reduced expenditure against others. For example, you might have no travel expenses and use public transport instead of owning a motor vehicle. Remember you only have $14,000 a year to live off and a modest retirement requires at least $24,000.
Super is so what?
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Table 1: Lifestyle choices based on retirement income Comfortable retirement Modest retirement Poor retirement
One annual holiday in Australia One or two short breaks in Australia near where you live each year
Regularly eat out at restaurants. Infrequently eat out at restaurants Good range and quality of food that have cheap food. Cheaper and less food than a ‘comfortable’ lifestyle standard
Owning a reasonable car Owning an older, less reliable car
Afford bottled wine Afford cask wine
Good clothes Reasonable clothes
Afford regular haircuts at a good Afford regular haircuts only at a hairdresser basic salon or pensioner special day
Take part in a range of regular Take part in one paid leisure leisure activities activity infrequently. Some trips to the cinema
A range of electronic equipment Not much scope to run air conditioner
Replace kitchen and bathroom No budget for home over 20 years improvements. Can do repairs, but can’t replace kitchen or bathroom
Private health insurance Use public health system
REFLECT
2. Reflect on the consequences of not saving enough for retirement. Explain what action you might take to avoid these consequences.
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Years 7-10 SuperTASK Activity 3 1: What is superannuation? SUPER IS SO TWEET Worksheet YOU WILL: YOU WILL NEED:
create short, powerful microblogs or ‘tweets’ promoting the Fact sheet: What is superannuation? importance of superannuation
Twitter Twitter is a very popular social tool. Through Twitter and 'tweeting' you can broadcast short burst messages, or microblogs to the world, with the hope that the messages are useful and interesting to someone.
The big appeal of Twitter is that is rapid and scan-friendly – you can track interesting tweeters and read their content at a glance. This is because every ‘tweet’ entry is limited to 280 characters or less.
The size of a ‘tweet’ means that the language you use has to be focused and clever so that they the message is powerful and easy to read.
Write short powerful microblogs Write at least two tweets about why super is so important. Assume your tweets will be read by everybody.
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Years 7-12 Super Activity 2 WHERE DOES SUPER
MONEY COME FROM?Fact sheet When must super be paid? How can you ensure financial Employers must pay super guarantee contributions into a super wellbeing when you retire? Discover fund at least every three months. They have 28 days after the the various ways your super can grow. end of each quarter to make the payment. Previously, this payment was made annually. The quarterly payment requirement has been designed to ensure contributions are invested as soon as possible and to give employees earlier opportunity to check THE SUPER GUARANTEE their employer is making the correct contributions for them.
Superannuation can grow through funds that come from:
an employer government super contributions The ATO imposes significant penalties, to encourage voluntary contribution employers to meet their obligations. If an employer salary sacrifice. doesn’t pay an employee's super on time and to the right fund, they may have to pay the superannuation Employers guarantee charge. This is interest on the outstanding Currently Australian employers must by law contribute 9.5% of amount (currently 10%), an administration fee ($20 an eligible employee's ordinary time earnings into a super fund. per employee, per quarter) as well as the outstanding This contribution is called the superannuation guarantee. amount of super. Ordinary time earnings are what you generally earn for ordinary hours of work, including over-award payments, bonuses, allowances and some paid leave. Overtime is not included. For example, if your ordinary time earnings are $15,000 per quarter There are two types of contributions to super: (three-monthly), your employer must pay $1,425 into your super Concessional – which are contributed before tax. These fund. This amount must come directly from your employer, not come from your employer and are not taxed before being from your gross salary. contributed to super, but are taxed after the contribution is in your super fund at 15% . Who is eligible for a super guarantee Non-concessional – which are contributed into super after contribution? being taxed. They are not subject to be taxed again when Your employer must make super guarantee payments on your put into super. Types of after-tax contributions include: behalf unless: contributions an employer makes from an employee’s after-tax income you are under 18 years old and do 30 hours or less of work contributions a spouse makes to a super fund per week for the employer some personal contributions. you are paid less than $450 (before tax) in a calendar month There is an annual cap on from the employer concessional and non- the work is of a domestic or private nature, for example as a concessional contributions. If part-time babysitter or nanny, and is 30 hours or less per week. To learn more about you contribute beyond the cap, adding to your super, Even if you are employed on a casual or part-time basis, you the excess will be added back to go to www.ato.gov. may still be eligible for super guarantee contributions by your au and search for your tax return and taxed at your 'personal super employer. marginal tax rates. These caps contributions' may change from time to time Self-employed people so it is important to keep aware Super is not compulsory for self-employed people, although of the rules and manage your many do make contributions. contributions wisely.
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the employer providing benefits of a similar value. One example EXTRA CONTRIBUTIONS TO SUPER of a salary sacrifice arrangement is to have some of the salary If you want to retire comfortably, your employer's 9.5% super or wages paid into an employee’s super fund instead of to the guarantee contributions may not be enough to build the lifestyle employee. you want for retirement. By making extra contributions, you will When super contributions are made through a salary sacrifice boost the amount of super you have when you stop working. agreement, these contributions are taxed in the super fund at The key is to start as soon as possible so you can relax later. a maximum rate of 15%. Generally, this tax rate is less than Many Australians save more in super than the required amount the marginal tax rate and the sacrificed part of the total salary in the following ways: package is not counted as assessable income for tax purposes.
Some employers choose to contribute more than 9.5% for The Australian government super contributions their employees as a form of added benefit. A co-contribution from the Australian government is designed to Employees may choose to personally contribute extra help eligible people boost their retirement savings. money into super from their after-tax income or pay. Employees may salary sacrifice super contributions. If you are a low or middle-income earner and you make Some people are eligible for the Australian Government a personal (after-tax) contribution to your super fund, the super contribution. government also makes a contribution (called a super co- contribution) up to a maximum amount of $500. The amount of Personal super contributions government super co-contribution you receive depends on your Employees can boost their super by adding their own income and how much you contribute. contributions to their super fund or into their spouse’s super The ATO will work out if you are eligible for a super co- fund. Personal super contributions are the amounts contributed contribution when you lodge your tax return. If the super fund to their super fund from after-tax income (that is, from their take- has your tax file number (TFN), the ATO will pay the government home pay), so it is not taxed again unless they exceed the cap. co-contribution to your super account automatically. If a person is not working and under 65, he or she can also make Some low or middle income earners might also be eligible personal after-tax contributions to their super fund. for the low income super income tax offset (LISTO). When an employer makes a super guarantee contribution to an Salary sacrifice employee’s super account, the Australian government may make Salary sacrifice is an arrangement between an employee and a LISTO payment which equals 15% of the contributions. their employer to forego part of their salary or wages in return for The MoneySmart website RETIREMENT AND SUPER also provides helpful advice about growing your super for a comfortable Generally, you will not be able to access your super until you reach retirement. Go to your earliest retirement age, which is called your 'pr The preservation age is 60 for anyone born after 30 eservationJune 1964. age'. www.moneysmart.gov.au
There are only a few other cir and search 'super contributions' cumstances in which a person may be able to access their super before retirement. These include sever financial hardship, compassionate gr e ounds, a terminal medical condition, and permanent incapacity.
Once you become eligible to access your super, you have three options:
take it all as a lump sum invest it in a superannuation pension or annuity that pr with a regular income stream ovides you do a combination of both depending on the rules of the fund. Given that many people live 20 to 30 years in retir important that your super lasts as long as possible.ement, it is
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Years 7-10 SuperTASK Activity 1 2:MY Where EMPLOYER, does my super money come ME from? AND SUPER CONTRIBUTIONS Worksheet YOU WILL: YOU WILL NEED:
interpret information and make calculations to answer super Fact sheet: Where does my super money come from? contribution questions Answer sheet: Task 1 — My employer, me and super contributions INTERPRET SCENARIO
Frankie and Sarah want to know more about their superannuation. They know that their employer, BeachCrazi, should make a super guarantee contribution on their behalf. Read the three scenarios below and provide answers for their questions.
Scenario 1: Frankie Frankie, aged 25, is employed part-time (33 hours per week) in the office as an administration assistant grade 1. He is responsible for sending out invoices and preparing sales records. His pay is $825 per week before tax. Frankie also gets a weekly allowance of $15 because he has been trained to use certain programs.
Answer Frankie’s questions
1. Does the company need to contribute to my super?
2. Why do you think this?
3. If the company must pay my super, how much super should BeachCrazi contribute over three months (13 weeks). Show me your calculations.
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Scenario 2: Sarah Sarah, aged 30, is employed fulltime as a salesperson for BeachCrazi on a gross salary of $1,550 a week. She visits surf shops selling the company products. Since she began working for the company seven months ago, she has sold $200,000 worth of goods. The company gave her a bonus after six months for her hard work, which equalled 5% of her sales. After seven months, Sarah checked her super account and noticed there had been no deposits made in that time.
Answer Sarah’s questions:
4. Does the company need to put money to my super?
5. Explain why you think this?
6. If the company must pay my super, how much super should have been contributed by BeachCrazi after my first three months (13 weeks) employment. Show me your calculations.
7. What do you think I should do about the missing super contributions?
Scenario 3: BeachCrazi The ATO investigated Sarah’s claim that BeachCrazi failed to pay her super. The ATO found that no super guarantee contributions were made after her first three months in the job plus 28 days, nor since. BeachCrazi admitted there was an administrative error when Sarah commenced her job. The ATO ordered BeachCrazi to pay all outstanding super guarantee contributions, plus interest and a penalty. Beachcrazi paid the outstanding fees nine months (39 weeks) after Sarah began employment with them.
Answer BeachCrazi’s question:
8. How much money should our company deposit into Sarah’s account in her ninth month (39th week) of employment? How much money should our company pay to the ATO in penalties and interest? Show me your calculations.
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Years 7-12 Super Activity 3 WHAT DO I NEED TO
DO ABOUT SUPER? Fact sheet Find out how you can actively manage your super to ensure a comfortable retirement. You can keep track of your super, access the government’s co-contribution and access information to make decisions throughout your life to retirement.
your fund is liable to pay extra income tax on GETTING STARTED contributions your employer makes for you (including þ Check that you are eligible for super by going to the ATO salary sacrificed contributions) and may take this extra or MoneySmart websites. money out of your super account your fund must not accept any member contributions Refer to these websites to assist you: and you will miss out on super co-contributions even if www.ato.gov.au you're otherwise eligible. www.moneysmart.gov.au You can check if your super fund has your TFN by looking Check what super fund your super contributions will be paid into. at the statements they send you. If your statements show that your TFN is not held by your fund, you should contact In many jobs, your employer is required by law to allow you them. The super fund needs to know this so that your to choose either the employer's nominated fund or your own super account receives the correct tax treatment and other preferred super fund. They must give you a standard choice benefits. This also makes it easier to keep track of your form to choose your fund. This form is also available from super over your lifetime. the ATO website at www.ato.gov.au. Check if you are receiving the correct amount of super Choose a complying fund that is best for you. from your employer.
You will usually be able to choose where you want your Use the employer contributions calculator on the employer to pay your super. If you have the choice, it is MoneySmart website or the ATO’s employee superannuation important to choose a fund that is best for your situation. guarantee (SG) calculator tool on the ATO website as a Make sure your super fund is a complying fund, one which guide. complies with certain rules set by the government. If you think your employer isn’t paying the correct super Read the product disclosure statement (PDS) issued by a guarantee contributions, you can follow the steps below: super fund to all new members. 1. Check you are entitled to super guarantee before taking The product disclosure statement lists all the features and any further steps. benefits of the fund, and the fees and costs they charge. 2. Use the Estimate my super tool on the ATO website to see how much super guarantee your employer should be Some other factors that might influence your decision are paying. Print the report if the calculator shows you have considered in Activity 3: How do I choose a super fund? not received the right amount of super into your fund. Go Make sure you include your tax file number (TFN) on your to www.ato.gov.au and search for 'estimate my super'. standard choice form. 3. Confirm how much super guarantee you have received by checking super fund statements, contacting your When you start work, your employer will give you a tax file super fund, or checking your myGov account. number declaration form to complete. Your employer will 4. Show the report to your employer. use the completed form to pass on your TFN to the super 5. If the matter is not resolved, you can lodge an enquiry fund they pay your super into. It isn't compulsory for you to with the ATO. provide your TFN to your fund, but if you don't provide it:
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Check your super statements regularly. Find lost and unclaimed super.
You should also check the statements from your super fund Generally super can become 'lost' if you change your job, regularly to be sure your employer is paying the correct address or name and forget to tell your super fund. The amount into the right fund. Try to resolve any errors with ATO has a lost member register of people who have been your employer or the ATO as soon as possible; the longer reported by their super funds as lost. Usually, the super these issues are left hanging, the greater the risk of an fund that reports you as a lost member continues to hold unfavourable outcome for you. Make sure your super fund onto the money. has your current address so they can keep in touch with you. To protect your lost super from fees, super funds may be required to transfer your money to the ATO. This is known as Investigate the benefits of the Australian government co- unclaimed super and is held by the ATO for you to claim at contribution scheme. any time. When an eligible person makes extra (after-tax) super A myGov account allows individuals to view all their super payments, the Australian government can make a 'co- accounts including ‘Lost’ and ‘Unclaimed’ super and contribution' in their super fund or retirement savings consolidate by transferring their super to an existing fund account. The amount of the government co-contribution, account or making a direct claim for payment (where eligible). up to a maximum of $500, depends on the amount they contribute and their income. Monitor your super account.
This scheme relies on information contained in your tax The level of fees charged and the rate of return on your return and on information provided by your super fund. Find funds can make a very big difference to the amount built up more information about the super co-contribution scheme in your super fund when you retire. from the ATO website or the MoneySmart website. Plan retirement. Combine (consolidate) different super accounts. Deciding when and how to take your superannuation is Over your lifetime, you will probably work in a number of a complex decision, as there are many tax and welfare jobs, including casual and part-time jobs. If super has been implications. You can seek advice from someone who paid into your various employer-nominated funds, you could can help, such as a financial advisor or other qualified end up with super in a number of accounts in various super professional. funds. It is usually better if these amounts are combined into one, so you pay only one set of fees and costs. This means Set up a myGov account. you can keep track of your super more easily and help Use your myGov account to: maximise how much money you will have to live on when you retire. see a list of all your super accounts and request a transfer of your super from one account to another Before combining super funds, find out if a fund will look for lost or ATO-held super as well as view all your charge you to close your account with them and whether super accounts you'll lose any other benefits. Your fund may also insure you request a transfer of any lost or ATO-held super into your against death, illness or an accident. If you choose to leave preferred super account. your current fund you may lose any insurance entitlements you may have: this is especially important if you have Find out more on the ATO website at: www.ato.gov.au by a pre-existing medical condition. Make sure you get an searching 'how to create a myGov account'. appropriate level of insurance in your chosen fund. You may also consider which fund or account is suitable from a risk/ rate of return point of view. To maximise your investment and understand the risks it may be worthwhile seeking If you change jobs, appropriate independent professional advice. consider keeping the For more information on choosing a fund go to moneysmart. same superannuation gov.au and search "choosing a super fund". account.
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super? Years 7-10 SuperTASK Activity 1 3:THE What do GOVERNMENT I need to do about SUPER CO-CONTRIBUTION Worksheet YOU WILL: YOU WILL NEED:
interpret information about super Fact sheet: What do I need to do about super? identify the costs and benefits of personal super Answer sheet: Task 1 –The government super co-contribution contributions MoneySmart compound interest calculator: calculate compound interest go to moneysmart.gov.au and search 'compound interest describe the mutual roles of government and individuals in calculator'. growing super Find out about the government super co-contribution scheme, its positives and negatives, and who is eligible.
Income thresholds There are two co-contribution income thresholds: a lower threshold ($36,021 for 2016–17) a higher threshold ($51,021 for 2016–17).
If you earn $36,021 or less (for the 2016/2017 year), the federal government pays $0.50 (50 cents) for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $500 a year.
For example, if you make a $1000 non-concessional contribution and your income is less than $36,021 (for the 2016/2017 year), then your super fund account receives a $500 tax-free contribution from the Government. If you make a $600 contribution, the Government pays $300 into your super fund.
If your total income is between the two thresholds, your maximum entitlement will reduce progressively as your income rises. You will not receive any co-contribution if your income is equal to or greater than the higher threshold.
APPLY YOUR KNOWLEDGE
Use your knowledge about the government super co-contribution scheme to work out the advantages and disadvantages for Susie, Alim and the government.
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Susie When Susie was 16, she worked regularly at her part-time job in a hardware store. Susie's father was keen for her to develop the habit of saving. He suggested that Susie put $10 each week from her wage into a super fund. Her father promised that if Susie saved regularly from 1 July so that she had $500 by mid-June the next year, her parents would give her $500 to contribute to her account, bringing the total to $1,000.
Susie considered whether this was worthwhile. Susie’s father explained that if she had $1,000 in the account by the end of the tax year, the government would deposit a further $500 into her account.
Susie decided to give it a go. She saved $500 each financial year and her parents matched her savings. Each year she was able to obtain the maximum government super co-contribution amount. When Susie left school and took up a three-year apprenticeship with a wage of $32,000 to $35,000 each year, she decided to make the effort to keep adding to her super. In fact, Susie expects to have accumulated a lot of super savings (from herself, her parents and the government) within five years. By that time, Susie will decide whether she wants to continue this saving. If she doesn't, she will be able to leave her savings in the account to grow at compound interest until she retires.
1. Over five years, while working part-time then earning apprentice wages, how much super co-contribution will Susie have gained from the government if her personal contributions are over $1,000 a year?
2. Use the compound interest calculator on the MoneySmart website (www.moneysmart.gov.au) to calculate how much the $1500 a year super contribution will be worth in 5 years. To do this, assume the $1500 is paid annually, interest is calculated annually and the interest rate is 8%. (note that the answer to this question and question 3 ignore the fees charged by super funds. The reality is that the money accumulated would reduce substantially over time unless more contributions are made to the fund).
3. What difference would a contribution of $1500 a year to super make over: a. 20 years ______b. 30 years ______c. 40 years? ______
4. What would inhibit Susie from gaining all or part of the government super co-contribution?
Complete a cost benefit analysis 5. Susie is young and her income is low. What are the costs and benefits of Susie adding personal contributions to her super over the next 5 years? Use evidence (facts and calculations) to justify your analysis. Costs of personal contributions Benefits of personal contributions
6. Conclusion: Is maximising the government super co-contribution an effective financial strategy for for Susie? Justify your conclusion.
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Alim Alim, aged 18, is studying to be a doctor at university. He lives at home with his mother, who earns a modest salary but believes that super is important. She is encouraging Alim to study hard and minimise working hours, so that he can graduate without delay and earn a good income. Therefore, he is working casually for only 10 hours per week at the university’s IT department, repairing and maintaining laptops.
Alim has worked for 10 months at the university, earning $2,400 in the last three months, and he expects to continue earning the same. Alim’s mother has advised him to make voluntary contributions to super. Alim feels that he can just afford to add $15 a week as a personal contribution to super. It’s not a lot but he and his mother have seen the power of compound interest in his mother’s super account over time.
7. How much government super co-contribution will Alim receive after one year of employment?
8. Assuming no interest was paid, what was the balance of Alim’s super account after one year of employment?
9. Calculate how much Alim’s small super amount ($1170) will grow over 30 years. The super fund pays interest on Alim’s balance monthly. His fund earns 8% per year. Instructions on how to calculate compound interest is shown in the Instruction Sheet: How to calculate compound interest. (note that the answer to this question ignores the fees charged by super funds. The reality is that the money accumulated would reduce substantially over time unless more contributions are made to the fund).
10. If Alim increased his super contribution by $5 a week, how much government super co-contribution would Alim receive after one year of employment?
11. Assuming no interest was paid, what would be the balance of Alim’s super account after one year of employment?
12. Assuming Alim pays no further superannuation into this super fund, calculate how much his super balance of $1,540 will grow over 30 years. The super fund pays interest on Alim’s balance monthly. His fund earns 8% per year. Instructions on how to calculate compound interest is shown in the Instruction Sheet: How to calculate compound interest. (note that the answer to this question ignores the fees charged by super funds. The reality is that the money accumulated would reduce substantially over time unless more contributions are made to the fund).
13. Conclusion: Is maximising the super co-contribution an effective financial strategy for Alim? Justify your conclusion.
Page 18 Ta x , Super+You. Take Control. INSTRUCTION SHEET: HOW TO CALCULATE COMPOUND INTEREST
The formula for calculating compound interest is A = P x (1 + r)t
'A' is the accrued amount – that is the end amount of your investment
'P' is the principal, i.e. the starting amount
'r' is the percentage interest rate converted to a decimal rate (e.g. 2% is 0.02 or 2/100)
't' is the number of time periods (for example, 5 years or 60 months) – NOTE THAT THIS IS EXPRESSED AS A POWER
Example 1 - Annual compounding Example 2 - Monthly compounding Work out what $2,000 will grow to over 2 years for an Work out what $5,000 will grow to over 2 years for an investment or savings that grows at 8% per annum investment or savings that grow at 8% per annum compounding compounding annually. monthly.
Imagine that the interest is paid annually (in reality the interest First you need to divide the annual interest rate by 12, which is compounds monthly). 0.08/12 = .0067
A = $2000 (P) x (1+0.08)2 Second you need to calculate the number of time periods (‘t’) in months, which is 24. A = $2,000 x (1.08)2 A = $5,000 x (1+.0067) A = $2,000 x 1.1664 A = $5,000 x (1.0067)24 A = $2,333 A = $5,000 x 1.1738
A = $5,869
Using a scientific calculator to calculate to Using Excel to calculate to the power the power The formula in Excel is: Enter the base of the expression you want to calculate. For =POWER(x,y) example, if you wanted to compute 1.0067 raised to the power of 24, you would enter "1.0067." Where x = the number you want to calculate to the power Where y = the power in your expression Press the exponent key on the calculator, usually "^" or "y^x" or “xy” depending on your calculator. The function for a calculator on a smart phone is highlighted in Figure 1.
Enter the power in your expression. Continuing the example, to compute 1.0067 raised to the power of 24, you would enter "24."
To recap: When you have entered your data, press enter to reveal the 1. Enter the number you want to calculate to the power answer. (1.0067). 2. Press the exponent key on the calculator (highlighted in Figure 1 below) 3. Enter the power in your expression (24). 4. You may have to press equal to reveal your answer.
Page 19 Ta x , Super+You. Take Control. MAKE THE CONNECTION
14. Why do you think the government chooses to contribute money to an individuals’ super?
15. Write a paragraph that links the role of both the ATO and an individual in growing the individual’s super. Use the word “mutual”.
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super? Years 7-10 SuperTASK Activity 2 3: What do I need to do about CONSOLIDATING YOUR FUNDS Worksheet YOU WILL: YOU WILL NEED:
consider the impact on super growth when funds are Fact sheet: What do I need to do about super? consolidated represent data to model scenarios for analysis and evaluation develop advice for young people about super WHAT HAPPENS WHEN YOU HAVE SUPER IN A NUMBER OF FUNDS? COMPARE HOW MULTIPLE FUNDS CAN AFFECT YOUR EARNINGS.
Scenario: Emily Emily began her first fulltime job one year ago. Her annual salary is $70,000 and her employer contributes $127 a week to super. Before then she worked as a casual waitress and part-time singer. Emily had not thought about super until her friend showed her a graphic (Table 1) which she found on the MoneySmart website.
Table 1
Locating super information Emily realised that she may have multiple super funds from her three jobs. She used the myGov website to locate her super funds. She then researched her contributions and fees and recorded the details in a table:
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Performance per Emily’s super Annual admin fees Current balance month (based on past Insurance accounts and other charges 3 Year Return*)
Nova Super $14,000 6.35% 2% $320
CFI Super $5,275 8.9% 1% $260
First Class $6,650 5.8% 1.3% $175
* Note: past performance is not a reliable indicator of future performance
REPRESENT DATA FOR ANALYSIS
1. Create a model, digital or non-digital, to show how much super Emily will have at the end of one year if:
she keeps her super in the different funds if she consolidates into Nova if she consolidates into one of the other funds. EVALUATE INFORMATION TO MAKE DECISIONS
2. Emily has to decide what she will do with her three super accounts. Based on your models, recommend what Emily should do and explain why.
Create advice 3. What advice about super would you offer young people who are in the early stage of their working life?
4. Write some simple tips. Then elaborate with information they can consider to ensure they have super and that it grows well. Things to consider when making super decisions:
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Years 7-12 Super Activity 4 HOW DO I CHOOSE
A SUPER FUND? Fact sheet DECIDING ON A SUPER FUND
Choosing a super fund and choosing an investment strategy Explore what factors affect super decisions and can be very important financial decisions. There are three broad calculate how much money you might need to factors you should consider: accumulate in order to retire. what type of fund to choose the benefits/fees and costs of a fund what investment strategy you should apply to your money.
WHAT TYPES OF SUPER FUNDS ARE AVAILABLE?
There are five common types of funds.
Type of super Features fund
Industry funds These funds are open to people working in a particular industry or under a particular industrial award. Some industry funds allow anyone to join. Their features may be particularly suited to workers in that industry. ge Retail funds These funds are operated by financial institutions and are open to everyone. They allow a lar number of people and companies to operate their super arrangements as a single group. e Corporate funds These are generally open to people who work for a particular company or employer and ar usually tailored to meet the requirements of the particular company and its employees.
Self-managed super These are also known as do-it-yourself or DIY funds and are used by people who want to e solely funds (SMSFs) create and operate their own super fund. It must have less than five members who ar responsible for the management and operation of the fund within a strict legal and regulatory framework. They are generally unsuitable for people with small amounts of money.
Public sector funds These funds are provided by the government for public sector employees.
Each type of fund can have features that one person might see as a strength and another see as a weakness. For example, ou a SMSF to one person might offer greater investment flexibility, but to another, it means too much responsibility and risk. Y need to consider which features are important to you when making your choice of fund.
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BelowTYPES are typical OF characteristics INVESTMENT of different OPTIONS types of investment options within super.
Super funds invest your money to grow your nest egg over your working life. Your super fund will invest your super in different types of assets, such as cash, bonds, Australian shares, property and international shares. Most super funds will package these assets into different investment options which have varying degrees of risk. Usually, super funds let members choose their investment options.
Below are typical characteristics of different types of investment options within super.
Investment mix Typical characteristics
Source: Super investment options, MoneySmart www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-investment-options Reproduced with permission of ASIC.
Page 26 Ta x , Super+You. Take Control. WHAT TO CONSIDER WHEN CHOOSING A FUND
1. Fees and costs 4. Extra contributions All super funds charge fees. Every dollar paid in fees will Sometimes an employer offers to pay more than 9.5%, reduce the amount in your super account. Super funds must for example, when an employee joins the default fund. show all significant fees in a table in the fund'sproduct This might be worthwhile, but you should find out about disclosure statement (PDS). These fees can make a large the details of the fund first. For example, does the fund difference to the amount you accumulate over your working allow you to take advantage of the government's super life, and hence the income you will have in retirement. contribution scheme? Industry and corporate funds may be set up on a not-for- 5. Investment options and performance profit basis and they can charge lower fees. However, you You can make your own decisions about how your super is should compare the costs with the returns — If a fund invested. makes a higher return, it may be worthwhile to pay its higher charges. Check the investment options available in your super fund. If you want the flexibility to change or concentrate 2. Additional features on particular asset types, you need to check what the Some funds will provide access to personal loans or the fund offers. Find out the returns the fund has earned for services of a financial advisor because they can obtain a members over the last five or more years. Don't make a group discount for members. Some funds allow you to open decision based on the performance of one year — you need and make contributions to a spouse account. You need to to consider a longer period of time to get a better picture of decide whether these services are important to you. how effectively the fund is performing. 3. Insurance cover MoneySmart provides advice on how to judge a super fund’s Many super funds provide life and disability cover to performance. Go to: www.moneysmart.gov.au and search their members. Super funds typically have three types of 'judging a super fund'. insurance for members: 6. Regulation Death cover (also known as life insurance) - pays a Check the super provider is licensed and complies with benefit to your beneficiaries when you die, either as a super rules and regulations. If the fund is complying, your lump sum or as an income stream money will get tax concessions. Individual funds must be Total and permanent disability (TPD) cover - pays you a able to provide evidence of whether they are complying. For benefit if you become seriously disabled and are unlikely more information about the super fund, check the Super to ever work again Fund Lookup services at: www.superfundlookup.gov.au Income protection (IP) cover - pays you an income stream for a specified period if you can't work due to temporary disability or illness
You can usually increase, decrease, or cancel your default insurance cover. The insurance premium is paid through your super fund and the premiums are deducted from your super account balance.
Remember, how a fund performs in one year is no guarantee of future return. SELECTING A SUPER STRATEGY
Most super funds offer you a choice about which assets to invest your super in. When making this choice, super members should consider a strategy to manage their super and its performance, by considering available asset options and performance, risks, returns and their personal risk profile.
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Risk and return Some assets, such as cash investments or fixed interest deposits, offer the potential for lower returns over time but provide less risk of the asset going down in value (known as a capital loss). Other assets such as shares are the opposite in that they offer greater potential returns but also a much higher chance of capital loss. The relationship between risk and return is often seen as positive – greater returns come with higher risk, while low returns mean lower risks.
You can use the compound interest calculator on the MoneySmart website as a guide to the expected rate of return. Go to: www.moneysmart.gov.au and search 'compound interest calculator'. Differing rates of return on a final super payout Rate of return over 45 years, reinvesting fund Start Finish
6% $10,000 $137,646
8% $10,000 $319,204
Difference over 45 years* $181,558
*Source: Compound interest calculator, MoneySmart, Reproduced with permission of ASIC.
Know your risk profile Generally, the higher the risk you take with your investments, the greater the return you would expect. Not everyone is comfortable with taking such risks, and they will choose a lower return, but with less risk. The diagram illustrates this relationship.
Relationship between returns and risks It is important for you to work out your risk profile. You need to know how you feel about risk to be able to select an investment option that meets your needs.
Someone who has a long time to invest will often accept higher risk. As you approach retirement age, you are closer to withdrawing your super and you want to be sure about the amount of super you will have. Your risk tolerance may fall sharply. Remember, at retirement your super may need to last another 20 to 30 years. Do you feel comfortable when you risk potential loss in INVESTING IN YOUR FUTURE order to hopefully gain higher returns? Compound interest and your investment options will determine your future. The magic of compound interest means your super account will grow while you work as your employer continues to pay a contribution into your account. The more money you contribute early on, the more money you will have when you retire. Also you can consider the investment options offered to you by your fund. Your choice of investment can have an impact on how much money you have down the track.
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Activity 4: How do I choose a super fund? Years 7-10 SuperTASK 1 MAKING A DIFFERENCE TO MY SUPER Worksheet YOU WILL: YOU WILL NEED:
interpret data to develop conclusions about how different Fact sheet: How do I choose a super fund? actions impact on super draw conclusions about factors that affect super fees draft a plan for a text designed to inform youth about actions they could take to improve their retirement
There are many decisions you can make that will impact the amount of superannuation you have for retirement. These include:
making contributions sooner earning a higher income delaying retirement making payments to your superannuation through salary sacrificing (before tax) the fees charged by your super fund the investment performance of your super fund.
The superannuation estimates and fees in Tables 1-6 were calculated using the MoneySmart Superannuation calculator (www.moneysmart.gov.au ). Tables 1-4 assume an 8% annual investment return and a 1% contribution fee. INTERPRET DATA TO DEVELOP CONCLUSIONS
In this task, you will interpret projected superannuation amounts at retirement based on these decisions.
Table 1: The effect of making super contributions earlier Jane Miguel Sunil
Age now 20 25 35
Age at retirement 67 67 67
Super accumulated now $5,000 $5,000 $5,000
Annual salary $50,000 $50,000 $50,000
Fees paid $23,871 $18,248 $10,300
Estimated super (after fees) $893,289 $683,366 $386,651
1. Conclude: What conclusions can you make about starting super at a young age? Use statistics to justify your conclusion.
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Table 2: The effect of earning a higher income Kwong Pearl Ali
Age now 23 23 23
Age at retirement 67 67 67
Super accumulated now $5,000 $5,000 $5,000
Annual salary $40,000 $60,000 $80,000
Fees paid $18,876 $21,701 $24,618
Estimated super (after fees) $614,774 $903,906 $1,195,815
2. Conclude: What conclusions can you make about the effect of earning a higher income? Use statistics tojustify your conclusion.
Table 3: The effect of delaying retirement Tim Thomas Tanya
Age now 23 23 23
Age at retirement 67 69 72
Super accumulated now $5,000 $5,000 $5,000
Annual salary $50,000 $50,000 $50,000
Fees paid $20,339 $22,638 $26,519
Estimated super (after fees) $761,442 $847,250 $992,151
3. Conclude: What conclusions can you make about the effect of delaying retirement on superannuation? Use statistics tojustify your conclusion.
Table 4: The effect of making additional payments above your employer's 9.5% contribution Rosa Will Vince
Age now 23 23 23
Age at retirement 67 67 67
Super accumulated now $5,000 $5,000 $5,000
Annual salary $50,000 $50,000 $50,000
Make voluntary contribution $60 $120 $180 (before tax salary sacrifice $ amount per month)
Fees paid $21,166 $22,091 $23,015
Estimated super (after fees) $854,625 $947,285 $1,039,945
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4. Conclude: What conclusions can you make about the effect of earning a higher income? Use statistics tojustify your conclusion.
Table 5: The difference fees can make Fund A Fund B Fund C
Age now 23 23 23
Age at retirement 67 67 67
Super accumulated now $5,000 $5,000 $5,000
Annual salary $50,000 $50,000 $50,000
Contribution fee 1% 2% 3%
Fees paid $20,339 $27,655 $34,971
Estimated super (after fees) $761,442 $754,126 $746,810
5. Conclude: What conclusions can you make about the difference fees can make? Use statistics tojustify your conclusion.
Table 6: The difference super fund performance can make Fund A Fund B Fund C
Age now 23 23 23
Age at retirement 67 67 67
Super accumulated now $5,000 $5,000 $5,000
Annual salary $50,000 $50,000 $50,000
Contribution fee 1% 1% 1%
Fees paid $15,569 $20,339 $26,812
Average annual performance 7% 8% 9%
Estimated super (after fees) $580,557 $761,442 $1,008,074
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The statistics on the previous page show how the performance of 3 different super funds affects estimated super at retirement. When selecting a super fund, it is important that you compare the performance of each fund over at least 5 years and consider the charges applied to the fund.
6. Conclude: What conclusions can you make about the difference super fund performance can make? Use statistics tojustify your conclusion.
7. Look at the fees that different individuals paid on their superannuation in Tables 1-4 and Table 6. A contribution fee of 1% was charged on each superannuation account. What conclusions can you make about the impact that the following has on the fees charged:
a. the time the super fund has been in place b. the value of the super fund.
Use evidence from the tables to justify your conclusions.
CREATE AN INFORMATION TEXT OR INFOGRAPHIC
8. Use the conclusions you have made from your interpretation of the data above to plan a flyer or infographic promoting the action young people could take to maximise their super.
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DRAFT IDEAS
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Activity 4: How do I choose a super fund? Years 7-10 SuperTASK 2 DECIDING ON A SUPER INVESTMENT STRATEGY Worksheet YOU WILL: YOU WILL NEED:
identify the criteria that influence superannuation investment Fact sheet: How do I choose a super fund? decisions identify the financial risks and rewards of different superannuation investment asset options conduct a cost-benefit analysis of superannuation investment strategies design and justify a course of action to achieve given retirement goals
In this task, you are to conduct a cost-benefit analysis of Advice should acknowledge the client’s: different superannuation investment options to propose a course of action for two hypothetical clients. You will then retirement goals identify financial risks and rewards of different superannuation stage in life investment options, and match these to your hypothetical clients’ risk profile circumstances. You will then create and justify advice about a available funds course of action for each client to achieve their retirement goal. investment options. DECIDE A COURSE OF ACTION
Scenario You are a qualified financial advisor for a reputable financial planning company. You have two clients, with unique circumstances, each seeking superannuation advice. Having gathered information about their risk profiles and goals, your task is to analyse each client’s circumstances and propose a course of action for superannuation investment over the short, medium and long-term, to assist them to meet their retirement goals.
Identify the objective
Client A Client B Client A is a 24 year-old nurse, early in her working career. She Client B is a plumber, aged 60, who is currently earning $85,000 has been earning about $70,000 a year but expects her salary will a year. He is planning to retire at 65. He has been contributing to increase with experience. She also has overtime opportunities and super since he began work. He currently has enough for a very thinks her salary could reach $95,000 next year. She is not a risk- modest retirement. taker although she wants to make the most of her superannuation. By nature, he enjoys action sports such as skiing and skydiving. She believes she has a long-term career in nursing and is But he hopes to enjoy a quiet retirement life with his partner who interested in soon working overseas for some years. Later, she has very little super due to mostly unpaid work in the home. They hopes to have a family. She assumes she will not be eligible for a hope for a modest to comfortable lifestyle in retirement. government pension when she retires. However, by retirement, she While he has had no breaks in his career, he has not volunteered extra would like a comfortable life that includes overseas travel. payments. He has worked for four employers in his career and his Her employer pays her super to an industry fund. The fund is super is in three different super funds, two of which are industry funds known to consistently perform well, although the fees and charges and one being a retail fund. The industry funds charge few fees but can be high. The fund packages its investment asset types (cash, they are high and the retail fund charges many types of fees, which fixed interest securities and shares) into four options — growth, are not too high. One of the industry funds is performing better than balanced, ethical and conservative. the other two funds. The fund packages its investment asset types into three options — high growth, balanced and conservative.
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Your process will involve:
1. creating a client profile 2. deciding a super investment strategy using a cost-benefit analysis 3. proposing a course of action to inform an investment strategy 4. writing an evaluation of your course of action proposal.
Create a client profile 1. Create a profile to understand the unique circumstances of your clients. Client A Client B A nurse aged 24 A plumber aged 60
Clients’ goal/s for retirement
Client’s stage in life
Client’s financial risk profile (low, medium, high)
Client’s available super funds and their type
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Decide a super investment strategy using a cost-benefit analysis 2. Analyse the risks and rewards (costs and benefits) of different investment strategies with the clients in mind. Client A Client B A nurse aged 24 A plumber aged 60
Super investment asset types/investment options available to client
Potential risk/s of the investment options
Potential reward/s of the investment options
Potential risk/s in the client’s life events
Potential reward/s in the client’s life events
Possible suitable super investment option/s for:
short-term medium-term long-term
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Propose a course of action to inform an investment strategy 3. To help your clients make investment decisions, use the template below to show investment advice including objectives, investment options (asset type combination), short, medium and/or long-term strategies, and expected outcomes. Justify your advice.
Client A: Course of action
Short-term objective/s Medium-term Long-term objective/s objective/s
Strategy: Investment Strategy: Investment Strategy: Investment option/s option/s option/s
Expected outcomes Expected outcomes Expected outcomes
Justification for these Justification for these Justification for these conclusions conclusions conclusions
Retirement goal
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Client B: Course of action
Short-term objective/s Medium-term Long-term objective/s objective/s
Strategy: Investment Strategy: Investment Strategy: Investment option/s option/s option/s
Expected outcomes Expected outcomes Expected outcomes
Justification for these Justification for these Justification for these conclusions conclusions conclusions
Retirement goal
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Evaluate your course of action proposal 4. Write a paragraph that describes your proposed course of action for Client A and evaluates how effectively your proposed plan meets Client A’s goal. Do another paragraph for Client B.
Alternatively, write a comparative piece explaining why your courses of action vary for Client A and Client B.
DESCRIPTION (OR COMPARISON) AND EVALUATION OF COURSES OF ACTION
Page 39 Ta x , Super+You. Take Control.
Years 7-10 Super Activity 5 SUPER, THE
ATO AND YOU Fact sheet
WHAT ROLE DOES THE ATO PLAY IN RELATION TO SUPER? DISCOVER WHAT RESPONSIBILITIES THE ATO HAS FOR YOUR SUPER LIFE CYCLE AND LINK THESE RESPONSIBILITIES TO BOTH INDIVIDUAL AND BUSINESS SUPER.
ATO REGULATION AND ADVICE
The ATO regulates super and provides a great deal of advice to assist individuals and businesses to take responsibility in complying with super rules and to manage super. The ATO’s work includes regulation and advice about:
super guarantee contributions accessing super early or at retirement government super contributions (co-contribution and low consolidating super or transferring between funds income super tax offset) using myGov other contributions self-managed superannuation funds (SMSFs). salary sacrificing keeping track of your super – including lost and ATO-held unclaimed super Know about accessing your super Cautionary advice Generally you cannot access your super until you reach your The ATO also investigates and seeks to penalise illegal practices in earliest retirement age, which is called your 'preservation age'. relation to super, and also offers cautionary advice. The preservation age is 60 for anyone born after 30 June 1964. An example: Once you become eligible to access your super, you can either Illegal super schemes often target people who are under financial take it all as a lump sum or invest it in a superannuation pension pressure or who do not understand the super laws. Some people or annuity to provide you with a regular income stream, or a promoting illegal super schemes will tell you that they can help combination of both depending on the rules of the fund. Given you access your super early to pay off credit card debt, buy a that many people live 20 to 30 years in retirement, it is important house or car, or go on holiday. They claim they can offer early that your super lasts as long as possible. access to your super savings by transferring your super into a self-managed super fund (SMSF). Early access to your super These schemes are illegal. If you participate in one of these There are only a few other circumstances in which you may schemes, they will cost you a lot more than the super you access be able to access your super before retirement. These include and may get you into a lot of trouble. For example: severe financial hardship, compassionate grounds, a terminal medical condition and permanent incapacity. These schemes are illegal and heavy penalties apply if you participate. Deciding when and how to take your superannuation is You may become a victim of identity theft. Identity theft a complex decision, as there are many tax and welfare happens when someone uses your personal details to implications. You can seek advice from someone who can help, commit fraud or other crimes. Once your identity has been such as a financial advisor or other qualified professional. stolen and misused, it can take years to fix. When you access your super, how tax applies to your super They may charge high fees and you risk losing some or all of benefits depends on a number of factors, such as your age, the your super to the scammer. source of your benefit and how your benefit is paid. You can find For more information, go to the ATO website at www.ato.gov.au out more on the ATO’s website. and search for 'illegal super schemes'.
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Activity 5: Super, the ATO and you Years 7-10 SuperTASK 1 WHO IS RESPONSIBLE FOR SUPER? Worksheet YOU WILL: YOU WILL NEED:
identify the responsibilities of the ATO and businesses in Fact sheet 1: What is superannuation relation to super Fact sheet 2: Where does my super money come from? make conclusions about the role of the ATO in Australian Fact sheet 3: What do I need to do about super? society Fact sheet 4: How do I choose a super fund? Fact sheet 5: Super, the ATO and you What role does the ATO play in relation to super? And what responsibilities do individuals and businesses have in supporting individuals’ superannuation?
LOCATE INFORMATION AND IDENTIFY RESPONSIBILITIES
1. Review Super Fact Sheets 1, 2, 3, 4 and 5 to identify responsibilities of the ATO, businesses and individuals in relation to super. Record them in the table below.
What responsibilities do we all play in relation to super? Responsibilities
Aspect of super ATO Businesses Individuals
Example: Keeping businesses and Seeking information from ATO Seeking information from ATO Educating about super individuals informed about sources such as the website sources such as the website super and helplines and helplines
Page 41 Ta x , Super+You. Take Control.
Develop a conclusion about super, the ATO and you 2. Now that you have explored the world of super and the role played by the ATO, respond to the statement:
“The ATO is working for all Australians”.
Use the criteria below to guide your development of an informed and justified response. Conclusion
Point State your conclusion in response to the statement (one sentence)
Elaboration Explain in a little more detail why you conclude this (one or two sentences)
Evidence/Example Provide evidence or arguments based on your analysis of findings (several sentences)
Relate Restate your conclusion (one sentence)
Criteria – Your conclusion:
is concise and to the point explains big understandings about the role of the ATO in Australian society identifies key ideas, for example, who 'all Australians' are, the ATO’s role in super, aspects of super uses facts or examples to support big ideas.
An evidence-based conclusion is a conclusion that is based on research and analysis of data and information.
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Activity 5: Super, the ATO and you Years 7-10 SuperTASK 2 EARLY ACCESS AND ATO SCAM ADVICE Worksheet YOU WILL: YOU WILL NEED:
research and create informed advice about early access to Fact sheet: Super, the ATO and you super and avoiding scams research the responsibilities of the ATO in relation to super and scams
EARLY RELEASE SCHEMES FOR SUPER MAY BE SCAMS. INVESTIGATE THE RISKS AND BENEFITS OF PEOPLE ACCESSING THEIR SUPER BEFORE THEY ARE ENTITLED TO. SEE HOW THE ATO CAN ASSIST PEOPLE TO AVOID BEING SCAMMED.
DEVELOP INFORMED ADVICE
Investigate the following scenario and prepare a presentation which offers informed advice about scams and how the ATO can assist.
Scenario You are the president of a sports club. One of your members found this flyer when they parked at your local sporting ground last weekend. A number of members are talking about getting early release of their super.
EarlyRelease Super ERS
Do you need money? Pay off your bills! The share market is not recovering this year! Your super money is not making enough for you! ERS can help you get hold of your lazy super money for a small fee. Contact: 1300 123 456
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Your role You have studied super at school in business studies. Club members ask you for advice about how someone can access their super before retirement.
Club members are in a range of financial situations:
employed and accumulating super unemployed or working reduced hours in their jobs struggling to pay off their credit card bills, loans and mortgages.
You realise there is a lot of misinformation about the benefits and risks of applying to the EarlyRelease Super company in the flyer. You begin some research and find material on the ATO and MoneySmart websites: www.ato.gov.au and www.moneysmart.gov.au
You record the important points about:
when the early release of super is legal how these superannuation scams operate who they target warning signs schemes against which the ATO and ASIC have taken action.
Your task 1. Research the issue and how the ATO can assist, using the important points above as a guide.
2. Prepare a presentation for your club members, outlining the situation in relation to the early release of super. Prepare a presentation that sets out the facts simply but accurately. Include the important points you have identified.
3. You can select any appropriate and interesting format for your presentation. It could be:
a multi-media presentation an article for the club newsletter page for Facebook or another form of social media another format.
4. If you have created a digital presentation you can embed it or upload it to the Tax Super and You forum in a new discussion topic.
See the full range of super information, online tools and videos support on the ATO website at: www.ato.gov.au
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Years 7-10 SuperINTERACTIVE WATCH YOUR SUPER GROW Worksheet YOU WILL: YOU WILL NEED:
analyse how life events can have negative and positive Watch your super grow: Life event cards – two from the set effects on super and retirement per group consider consequences of life events for the short, medium butchers’ paper and long-term in relation to retirement marker pens propose strategies to manage the effects of life events on super present and share creative ideas about managing life events and super
Choices made over a 40-year period have an impact on the quality of life in retirement. What decisions do people make at different stages in life that affect their super for retirement? COLLABORATIVELY BRAINSTORM AND PRESENT – SUPER AND LIFE EVENTS
Your task: Create a hypothetical person and make decisions about how to respond to events at various stages of their life so as to maximise his/ her super for retirement.
Work collaboratively In a group, plan to assist a hypothetical person achieve the long-term goal of maximising their super funds for retirement at 65 years of age.
1. Identify a person as the focus of your life scenario. Describe him or her — gender, job, annual income, family, needs and wants. Is he/she a saver or a spender? Does he/she want a modest or comfortable retirement?
2. Refer to the Super fact sheets and worksheets to inform your thinking.
Discuss 3. Discuss the two life event cards issued to you.
4. Brainstorm possible effects of these life events on the person’s financial circumstances:
Be sure to consider and predict how this would affect their super in the short-term, medium-term and long-term. Propose strategies or actions your person may use to manage the negative effects of life events on their super in the short-term, medium-term and long-term.
Design a representation 5. Create a visual representation on your chart paper that shows:
the possible short, medium and long-term effects of life events no retirement and super. Short-term: 1–5 years strategies your person could use to manage these effects. Medium-term: 6–20 years the possible short, medium and long-term effects of these strategies on retirement. Long-term: 21 years on
Share 6. Display your representation on the wall. Take time to view others’ representations. 7. Present and explain your representation with the class. 8. Reflect on other representations, probe others’ thinking and offer feedback.
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Years 7-10 SuperINTERACTIVE WATCH YOUR SUPER GROW Teacher resource
Event 1 Event 2 Serious injury – unable to work for Receive promotion or a new high-pay- two years ing client for the business
Event 3 Event 4 Go back to study to update your skills Severe illness of a partner or spouse or qualifications
Event 5 Event 6 Receive a small inheritance from a Your mining shares rise to a record high rich aunty
Event 7 Event 8 Work overseas for four years Have a baby at a young age
Event 9 Event 10 Retrenched from your job, have a small Have a baby late in life payout, have to retrain
Event 11 Event 12 Change jobs a few times Win a large amount in the lottery and only need to work part time
Event 13 Event 14 Buy first home House burns down, insurance covers 80% of loss
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Years 7-10 SuperQUICK QUIZ SUPER Worksheet YOU WILL: YOU WILL NEED:
test your new knowledge about super Answer sheet: Quick quiz – Super
After you've finished all the topics, take the 10-question test on Super to see if you're a super expert.
QUICK QUIZ: SUPER
Choose one answer for the following super questions:
1. Australians are living longer and there will be a greater demand for government pensions and services in the future. At present there are five people of working age for each person aged 65 years and over. By 2047: Australia will have more people in the working age group and less demand for government pensions and services. Australia will have the same number of people in the working age group and greater demand for government pensions and services. Australia will have fewer people in the working age group and less demand for government pensions and services. Australia will have fewer people in the working age group and a greater demand for government pensions and services.
2. The super guarantee is a contribution of 9.5% of an employee's ordinary time earnings paid by an employer into a superannuation fund. Under what circumstances is an employee eligible for the compulsory guarantee payments by an employer? When they are: a nanny working less than 15 hours per week and aged under 17 earning $400 taxable income in a calendar month working less than 20 hours per week and under 18 years of age none of the above.
The manager of a novelty business has asked you a number of questions about superannuation. Indicate whether the company is allowed or not allowed to do the actions with regard to superannuation.
3. The business sometimes has cash flow problems and she wants to pay the super guarantee charge into an employee's super fund every six months. Allowed Not allowed
4. As part of a new enterprise bargaining agreement for employees, it is agreed that the company will pay a 12% super guarantee contribution. Allowed Not allowed
Page 47 Ta x , Super+You. Take Control.
5. A 30-year-old employee earning a low-middle income per year is contributing extra small payments to his super. He wants to know if he is eligible for the government super co-contribution scheme. Eligible Not eligible
Choose one answer for the following super questions:
6. Ali has had many casual jobs while studying. She has now started her first fulltime job in marketing and plans to stay in that industry. What should she do about her super funds? Consolidate her funds into one fund which charges the least fees. Investigate which fund best suits her circumstances and roll her super funds into that one. Don't do anything. Keep her super where it is as she will be charged fees if she moves her super to other funds.
7. Kwong has changed jobs a number of times and is not sure if the super fund is receiving his contributions. The best way he can find out is to: ask his present employer ask all of his previous employers check the ATO website all of the above.
8. Maria is aged 37 and has been paying into a super fund since she started work at 19. She has a healthy balance in her super fund and has decided to buy an apartment with her partner. She wants to withdraw enough super money to use as her share of the deposit on the apartment or else they will not get the apartment. Her situation is that she: can withdraw money from her super fund as it would cause her financial hardship if she has to keep paying rent if they could not buy the apartment can withdraw her super when she reaches the age of 50 years can withdraw her money when she decides to retire from work can withdraw her money when she reaches her preservation age and retires.
9. You want to take a strategic approach to your super investments. You need to consider: The investment options available in the super fund and how the investment assets have performed in the short and long-term Your risk profile. How the investment assets have performed, your risk profile and stage of life, and the risks and rewards associated with the investment strategies. How much money you and your employer are contributing to super.
10. You have been approached by a company who offers early access to your super savings by transferring your super into a self- managed super fund (SMSF) and helping you to pay off a credit card debt. What is the best decision? You decide to do this because the debt has high interest and once paid off, you can start to put more into the new super fund. You decide not to do this because the fees seem high. You contact the ATO to find out about early access because you do not think this is possible before the preservation age. You decide to do this because you have more control over a self-managed fund.
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