Tutorial 6 solut

The University of Western Australia **We aren't endorsed by this school
ACCT 1101  
Oct 16, 2023
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Business School Accounting & Finance Discipline FINA2209 Tutorial 6 (in Week 8) Accumulating Superannuation Q1. Under what circumstances would a salary sacrifice arrangement not be recommended for a client? Discuss. Whether salary sacrifice to superannuation is beneficial depends on the individual's circumstances, career planning and retirement needs. Where the maximum rate of tax payable by an individual is less than 15%, then salary sacrifice may not prove worthwhile because any salary sacrifice contribution made by an employer will be taxed in the Q2. Liam, who is 56 years old, made two non-concessional contributions to his super fund in July 2022 and August 2022 of $50,000 and $70,000 respectively. He plans to make another nonconcessional contribution in January 2023 of $70,000. Has Liam exceeded his non- concessional contributions cap? Liam will have exceeded the non-concessional contributions cap of $110,000 per year because his nonconcessional contributions total $190,000. However, if we Q3. Karinya, who is 67 years old and a retired tradesperson, earns most of her income from investments but occasionally works as a contractor or as an employee for a salary. For this financial year, she estimates she will earn about $47,000 ($37,000 from investments, $7,000 from contracting and $3,000 from salary). She makes a $2,000 non-concessional contribution from her after-tax income into her superannuation fund. Is she eligible for the government co-contribution and if so, how much will she receive? Karinya will be eligible for the co-contribution because she is less than 71 years of age and at least 10% of her total income has been earned from employment/self-employment ($10,000). The amount of co-contribution she will be eligible for is:
$500 - (($47,000 - $42,017)*0.03333) = $333.92 Q4. Carmen who is 45, is self-employed and has made a concessional contribution to superannuation of $70,000. How is this contribution taxed? If she wanted to later withdraw the excess, how much can she withdraw? If she decides to leave the excess in the fund, how will it be treated assuming she also made a non-concessional contribution of $150,000 during the financial year? Carmen's concessional contributions cap is $27,500 p.a. The first $27,500 of her concessional contribution will be taxed at 15%. She has the option to leave the excess in the fund or to withdraw up to 85% of it, which takes into account the tax paid on the concessional contribution in the fund. If she decides to leave the excess concessional contribution in the fund, it will be counted against her non-concessional contributions cap. Q5. Bill recently graduated from university and has started full time work. His starting salary is $65,000 p.a. and his employer is paying him mandatory employer contributions of 10.5% p.a which are contributed quarterly in arrears into his superannuation fund. The long-term expected average compound rate of return for the fund is 7.6% p.a. Tax on contributions is levied at 15%. The average rate of salary growth is 4% p.a. What is his expected accumulation value (EAV) over 30 years? How is the EAV projection useful for clients? What warnings would you give to clients after calculating their EAV? (1 + r) n − (1 + g) n r Expected accumulated value (EAV) = SS x CP x (1 −𝑡𝑡 𝑐𝑐 ) x r − g x r (p) Where SS = $65,000, CP= 10.5%, t c = 15%, r=7.6%, n=30, g=4%, p=4 EAV is $954,118.56 The EAV gives a ballpark estimate of what retirement savings a person can end up with under a certain set of assumptions. The calculation is indicative only and the client should remember that their situation can change over time which may make those assumptions no longer valid. Some changes could be external to the client, (e.g. the superannuation guarantee scheme rate could change, interest rates could vary etc), and some are dependent on the client (e.g. salary and growth rate
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