So you've got your money into your fund & now you want to get it out. Taking money out of superannuation is fraught with as much potential for trouble as getting money in.

A superannuation benefit can either be a superannuation member benefit or a superannuation death benefit. The benefits can take the form of a lump sum or an income stream.

There is a concept of preservation age that will be relevant for people with dates of birth before after July 1960. Effectively, this concept allows the government to "age creep" the earliest date of being able to access certain transition to retirement benefits. Currently the age where transition to retirement can start is 55.

For recipient's aged 60 & above, all superannuation benefits received are tax-free. Individuals aged over 60 do not need to include these benefits in their income tax returns.

In unusual cases, a person over 60 may still be taxed on any element untaxed in the fund. (Payments from certain untaxed government superannuation funds.)

There is a proportioning rule that means that the payment of the lump sum or income stream to the member must be composed of tax free & taxable dollars in proportion to the balance of the members account. As an example, if the member's account was composed of $100 from employment contributions (taxed) & $100 from member non-concessional contributions (tax free), then a lump sum of $50 would be composed of $25 taxed & $25 untaxed.

Taking a Lump Sum

Taking a lump sum can be a great way for people aged between preservation age (currently 55 - 60) to access cash up to $150,000 completely tax free from their superannuation fund. The caveat is that the member must be completely retired.

For recipients aged between preservation age (currently 55 - 60) any tax-free component of a superannuation lump sum or income stream is non-assessable non-exempt income. The tax-free component comprises the crystallised segment & the contributions segment. This is normally made up of non-concessional contributions.

Any taxable component of a superannuation lump sum is included in the taxpayer's assessable income. The taxpayer is entitled to a tax offset to ensure that the tax rate is 0% on the taxable component that does not exceed his or her low rate cap amount of $150,000 for the 2009/10 year.

In order to draw a lump sum, the taxpayer in the 55 - 60 year age group must be retired.

Taking an Income Stream

The taxable component of a superannuation income stream received by a person under 60 must be included in their assessable income. A taxpayer above his/her preservation age but below 60 is entitled to a 15% tax offset in relation to the taxable component of the income stream. The tax-free component (i.e. monies that went into the fund in a non concessional fashion)

For those people in their transition to retirement phase (55 - 60 currently), the 15% tax offset can provide a valuable tax planning opportunity. The trick is to salary sacrifice while drawing an income stream such that marginal tax rates are kept at a maximum of 15%.

In this transition to retirement phase the maximum amounts that can be drawn is 10% of the member balance.

Once a person turns 60, any income stream payments are tax-free.

Minimum Income Stream Payments for Members over 60

Account based pensions and annuities must meet the minimum payment rules set down in Sch 7 of the SIS Regs.

For 2009/10, the minimum annual drawdowns must be:

0 - 64    2%

65 - 74  2.5%

75 - 79  3%

80 - 84  3.5%

85 - 89  4.5%

90 - 94  5.5%

95+       7%

Superannuation is a tax effective vehicle for saving into & retiring on so it pays to be aware of some of the main ways to get money into your superannuation fund. If you put too much into your Superannuation fund you could end up losing by having to pay excess contributions tax so please be careful & seek advice before making contributions.

Concessional Contributions

These are contributions that an employer makes on behalf of an employee or a self-employed person makes on behalf of himself or herself. Concessional contributions are tax deductible to the person or entity making the contributions and incur tax at a rate of 15% in the super fund.

Aged under 50 $25,000

Aged over 50 $50,000

Aged 65 to 74 $50,000 but must be gainfully employed for at least 40 hours in 30 consecutive days.

Non concessional contributions, either cash or in kind

These are contributions that you make from after tax dollars. For instance you may have money sitting in a personal term deposit that you want to shift over to your superannuation fund. The reasons you may want to shift your after tax dollars to superannuation are twofold. Firstly, tax on the earnings generated by your investment dollars inside superannuation is generally taxed at a low 15%. Secondly, when you arrive at retirement, monies inside your superannuation fund can continue to compound in value and generate interest, dividends, rent or other income totally tax-free. Bear in mind though, that once you?ve reached retirement age the tax rates and tax breaks for retirees are quite favourable outside of superannuation too.

Maximum Non Concessional Contributions ?

$150,000 per annum for those aged under 65, or if over 65 must be gainfully employed for at least 40 hours in 30 consecutive days.

$450,000 as a three-year bring forward for those aged under 65

Small Business Asset Proceeds

Contributions arising from the disposal of small business assets that qualify for the CGT small business 15 year or retirement exemption up to a lifetime indexed CGT cap amount. The cap is $1,100,000 for 2009-10. The $1,100,000 can include capital gains of $500,000 that may have arisen from the disposal of small business assets under the retirement exemption.

The contributions associated with small business assets are in addition to the annual caps on non-concessional contributions.

Government Co Contributions $1 for $ up to $1000

Put in $1,000 of your own money into your superannuation fund & the government will put in $1,000.

Neither your $1,000 nor the government?s contribution of $1000 will be taxed on the way into the superannuation fund.

The $1,000 cannot form a deduction against your personal or business income.

Primary considerations to pay attention to include,

• Must have minimum 10% personal income attributable to carrying on a business or from employment as a percentage of total income
• Income does not exceed $61,920
• Under 71 years of age
• If aged 65 ? 70, additional work rules of 40hours of gainful employment in a period of not more than 30 consecutive days
• Lodge an income tax return
• Not have a Visa

Make an eligible personal superannuation contribution (best to make the contribution from your personal bank account)

Spouse Contributions & Spouse Contributions tax Offset

A tax offset of $540 is available to a taxpayer who contributes up to $3000 to a superannuation fund that will benefit their spouse.

The tax offset effectively reduces the taxpayers tax liability.

A taxpayer is entitled to a spouse contributions tax offset only if ?

• The contribution is made on behalf of someone who is the taxpayer?s spouse (i.e. someone living with the taxpayer on a genuine domestic basis as a life partner)
• Both taxpayer & spouse are Australian residents
• The total of the spouse?s assessable income, reportable fringe benefits & reportable employer superannuation contributions for the income year is less than $13,800
• The full $540 offset is available for spouse incomes below $10,800. Between levels of $10,800 ? 13,799, the offset is available at 18% of the maximum rebatable contribution

Splitting Contributions between Spouses

This option may prove valuable where a younger spouse is making significant contributions while the older spouse is not. As the older spouse reaches retirement sooner, superannuation funds become available for pension payments sooner.

A fund member needs to apply to the trustee of the fund to rollover, transfer or allot for the benefit of the spouse, an amount of the members contribution made in the previous financial year that ended before the application.

The maximum split able amount is 85% of the member?s concessional contribution so long as the spouse?s contribution cap is not breached.

Barefoot Budget Reaction from Scott Pape on Vimeo.

Tax cuts are in the offing with the upper limit for the 15 per cent personal income tax band rising from $35,000 to $37,000 on July 1 and the rate for the $80,001 to $180,000 band dropping from 38 per cent to 37 per cent.

However, with June 30^th looming, it's time to consider ways to reduce your tax. The basic principle of tax planning is to try to defer income to future years and bring forward expenses to the current financial year. Examples:

Place money in a term deposit with all interest maturing after June 30, the interest will be taxed next year when your marginal rate may be lower.

Prepay the interest on your investment or marginal loans. A years interest on a loan of $300,000 would cost about $22,000 but would enable up to a $10,230 refund. However, to avoid the amount being credited to the principal, negotiate this strategy with your lender.

If you have school age children and are eligible for Family Tax Benefit Part A, investigate the Education tax refund. You may qualify for a refund of 50 per cent of expenses for a maximum claim of $750 for primary school age children and $1,500 for those at high school. The refund is only available for certain expenditure, for example computers, software, textbooks and materials. Search www.educationrefund.gov.au for further information.

Salary sacrifice to superannuation is still a great strategy because such contributions lose just 15 per cent. Superannuation is the perfect place to put an end of year bonus.

CGT can consume a considerable chunk of investment profits. Keep in mind that the relevant date is the date the sales contract is signed. Deferring the signing of the contract to the new financial year would result in the CGT being paid when you may be in a lower tax bracket.

Sell assets that will trigger a capital loss in the same year as you make a capital profit. The losses will reduce the CGT as they can be offset against the gains.

If you are eligible to contribute to super but don?t have an employer making contributions for you, you could reduce the CGT by making a tax-deductible contribution to offset the capital gain.

Most managed funds charge members on a % of the member balance. As an example, if your member balance is $300,000, and your fund manager charges 1.5%, then you'll pay $4500. This expense % is referred to as a Management Expense Ratio (MER).

In the business world, expenses are typically related to revenue and not to asset balances. For example accounting fees might be 2% of revenue. It appears that MER is used to compute management costs because it is a lot easier to sell investors on what sounds like a very small %. If your managed fund only yields 5% after costs of 1% then your gross yield is effectively 6%. 1% of 6% is therefore an amazingly large 1/6^th of revenue generated by your investment. Imagine if your managed fund advisor said that he could manage your investment but wants nearly 17% of every $ your investments earn to do the job!

With a self managed superannuation fund, costs are not a function of the yield of your invested monies but are related to the work & complexity associated with preparing and auditing the financial statements of the fund. As I've alluded to before, with the cost of accounting and auditing fees set to fall for certain structured funds, now is a great time to move your superannuation wealth to a self managed fund (SMSF).

Use the attached Excel Spreadsheet to compare outcomes.

At Noble & Associates, we've developed a low cost solution for helping you manage your own wealth. The technology we use is the same technology employed by the ATO in their +$200 million SBR project for release in July of this year.

Given that average managed superannuation costs run at 1.8%, reducing these costs in low return environments can add up to big goss returns over the long run.

We'd like to demonstrate to you, how we can help lower your cost of investment significantly and what this means for your future wealth situation.

We are holding a once off seminar on Tue 20^th of April at 6.00pm. Call now to book.

(We encourage other accountants to come and see how to engage with this technology for the benefit of your clients.)

SR 50 & 25 Growth Indices 10yr Av.

SR25 High Growth (91-100) Index 4.26

SR50 Growth (77-90) Index 5.09

SR50 Balanced (60-76) Index 5.26

SR25 Property Index 3.7

The SR50 Index and SR25 Index are the median returns of the largest 50 and 25 funds that we review. They are a good guide to the actual return of the 'average' fund over the same time frames.(www.superratings.com.au) Average of 4.58% is average of Indices presented here.

Compounding is a mathematical term and it is seriously significant when it comes to understanding how investment works. With compounding, very small investments can turn into very large investments given enough time. Time becomes a factor that carries almost as much importance as the rate and the dollars invested. An additional factor to consider is the frequency of compounding. A term deposit that pays interest monthly will deliver a greater future value than one that only pays annually.

Below, is an example of two investments with all factors being equal apart from the frequency of compounding.

Rate 6% per compounding period, 20 periods (1 period = 1 year), $1000 initial investment = Future value of $3207

Now if we compound the same amount at the same rate but with the compounding occurring more frequently

Rate 0.5% per compounding period, 240 periods (1 period = 1 month), $1000 initial investment = Future value of $3310

As demonstrated, the $1000 investment that compounds its' returns monthly has a higher future value than one that compounds annually.

So for your investments, pay attention to time, frequency, rate of return and $'s invested.

Our ancestors were lifted out of an impoverished subsistence existence by the advent of the agricultural revolution that was closely related to the industrial revolution.

Farming practices did not improve much between the 8^th & 18^th centuries. George Washington had access to ploughs that were no better than those used during the time of Julius Caesar.

Animal breeding and large scale agriculture that resulted from technologies like the seed drill, plow & mouldboard, harvesters and haying machines allowed for specialisation of skills outside of simply tending to the land. Read more about the agricultural revolution here

With free time and the development of a scientific mind set defined by the testable hypothesis, men were free to explore and experiment. In 1563, Rev. William Lee invented the stocking frame and by 1908 Henry Ford was mass producing the Model T Ford. Read more about the industrial revolution here

Both the agricultural & industrial revolutions relied heavily on energy extracted from burning carbon based fuels. Essentially, our lifestyles today owe much to scientific ingenuity and carbon.

Even as these two waves of wealth roll on and evolve a new and vastly more powerful wave of wealth is swelling up & that is the knowledge wave driven by information technology.

The knowledge wave brings with it, very different forms of wealth and as with the wealth delivered by both the industrial revolution & agricultural revolution, there will be winners & losers.

The knowledge revolution will reward the most creative and talented individuals and will decimate centrally controlled systems including energy, health and education leaving a more redundant and powerful society.

Exponential increases in processing speed and bandwidth will continue to put downward pricing pressure on everything touched by the power of bits.

Be prepared to for an exciting future characterised by new & different forms of wealth.

Here is the dictionary definition of speculation - engagement in business transactions involving considerable risk but offering the chance of large gains, especially trading in commodities, stocks, etc., in the hope of profit from changes in the market price.

Here is the dictionary definition of investment - the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

As the definitions indicate, speculation & investment are quite different activities. Booms bring out the speculators and as with the last housing boom, expectations ultimately get caught out by Mr Market. In fact gains on the housing market in the past have conditioned people to believe that gains are inevitable especially when it comes to part time property developers. Unfortunately, the reality is quite different and holding costs associated with speculative housing development invariable eats away any prospective return.

Educate yourself and be wary of opportunities to speculate. Long term wealth creation is best achieved through real business development and smart investing.

If you want to learn from the best, Warren Buffett makes his investment newsletter available here - www.berkshirehathaway.com