Diploma of Financial Planning Module 3: Superannuation Assignment

This document presents a completed homework assignment for the Diploma of Financial Planning (DFP) Module 3, focusing on superannuation. The assignment includes short-answer questions addressing core superannuation concepts such as market-linked funds, defined benefits, contribution limits (including the bring-forward rule), the work test, and salary sacrifice strategies. It also explores the taxation of superannuation, the pension benefits cap, and contribution splitting. The assignment further covers self-managed superannuation funds (SMSFs), including the sole purpose test and in-house asset test. The answers demonstrate an understanding of the rules around contributing to superannuation, contribution limits, accumulation phase versus pension phase, and the tax consequences across contributions, earnings, and withdrawals. The assignment aims to provide a comprehensive understanding of the fundamentals of superannuation, as required for financial planning professionals.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Diploma of Financial Planning
Module 3 Assignment
Submission Instructions:
Key steps that must be followed:
1. Please complete the Declaration of Authenticity at the bottom of this page.
2. Once you have completed all parts of the assessment and saved it (e.g. to your
desktop computer), login to the Monarch Learning Management System (LMS) to
submit your assessment.
3. In the LMS, click on the file ”Submit DFP Module 3 Assignment” in the Module
3section of your course and upload your assessment file/s by following the prompts.
4. Please be sure to click “Continue” after clicking “submit”.This ensures your assessor
receives notification – very important!
Click here to go to the Monarch LMS
Declaration of Authenticity*
I certify that the attached material is my original work. No other person’s work hasbeen used without due
acknowledgement. I understandthat the work submitted may be reproduced and/or communicated for the purposeof
detecting plagiarism.
Student Name*: Date:
* I understand that by typing my name or inserting a digital signature into this box that I agree and am bound by the
above student declaration.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Important assessment information
Aims of this assessment
This assessment covers the fundamentals of superannuation. It covers rules around contributing
to superannuation such as the work test, as well as contribution limits (both concessional and
non-concessional). Salary sacrifice strategies are addressed, as are the differences around a
superannuation fund in accumulation phase versus pension phase. Tax consequences across
contributions to super, money held within the accumulation phase, and lump sum withdrawal of
benefits (inclusive of pension payments) is also explored. SMSFs are addressed including
important tests such as the sole purpose test, and in-house asset test. The use of business real
property including in-specie contributions into superannuation is also addressed in the context of
SMSF strategies.
Marking and feedback
This assignment contains 4 assessment activities each containing specific instructions.
This particular assessment forms part of your overall assessment for the following units of
competency:
 FNSASICU503
 FNSFPL502
 FNSFPL503
If you are enrolled in SMSF units, the following units are also applicable.
 FNSSMS501
 FNSSMS505
 FNSSMS601
 FNSSMS602
 FNSSMS603
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer, it
must be fundamentally outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question) may also be deemed
not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include
plagiarism may also be deemed not-yet-competent. Please note, additional information regarding
Monarch’s plagiarism policy is contained in the Student Information Guide which can be found
here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your Trainer/
Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your assessor advising your
assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas
deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting
competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Skill based questions:
Where you are asked to write as though you are speaking to a client, your answers must show
your ability to:
 understand your client’s concerns/perspective/views
 show empathy
 display a professional response
 explain ideas clearly and simply so your client can understand the issues
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here to
assist you 

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 10 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours
Assessment Activity 1
Short Answer
Superannuation

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.1
Describe a market-linked fund.
Question 1.2
Describe a defined benefit.
Question 1.3
In the easiest terms, market linked funds refers to the debt securities and bonds that have a return
that is linked to the performance of various assets. Market Linked funds are issued for the fixed
terms like for a year to five years and remains in subject to the issuer of the credit risk. Market
linked funds are helpful in positioning the portfolio for the volatile markets and give out a
diversification that may be difficult to accomplish with respect to the conventional investments.
Such funds are constructed in order to meet the distinct goals, they have been found to be the
debt securities that relates with certain sort of characteristics with a returned potential determined
with the performance of the assets. There are certain assets that may be associated to include the
market indices, commodities, foreign exchanges and individual stocks and rates of interest.
A defined benefit is a retirement plan that an employer benefactors, where the benefits for the
employees are constructed by making use of a formula that looks into the factors such as salary
history and employment. The organizations looks after the portfolio management and the
investment risk for the plan. There are even limitations regarding on and when and by what the
process an employee can extract funds without paying any penalties.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
The bring-forward rule allows a fund member to bring forward two years of non-concessional contributions
from the future if they under age 65. From 1 July 2017, for people under 65, what are the maximum bring
forward limits based on their total superannuation account balance?Explain your answer.
Question 1.4
Alice believes you may as well die when you retire, so she chooses to continue to work on a casual basis at
Bunnings.She is 68 years old and works exactly 30 hours each month of the year. She wants to contribute her
own funds into superannuation, and seeks your advice as to whether she is able to contribute to super to top
it up. Can she contribute into her super fund, based on her age? Why or why not?
Question 1.5
Using an example, explain how salary sacrificing can reduce a person's marginal tax rate.
With respect to the current scenario, if a person is under the age of 65 years, they can bring
forward up to:
Less than $1.4 million: Access to $300,000 cap (over 3 years)
Greater than or equal to $1.4 million and less than $1.5 million: Access to $200,000 cap (over 2
years)
Greater than or equal to $1.5 million and less than $1.6 million: Access to $100,000 cap (over 1
year)
Greater than or equal to $1.6 million: Nil
According to the case study, it has been observed that Alice is 68 years old and has been working
30 hours in a month. With respect to the observation, it can be said that if someone is of the age
of 65 years and above but less than 75 years a person can make a concessional contribution and
in order to do so they have to pass a work test in the financial year during which they want to
contribute. The work test comprises of working 40 hours in any 30 days period within the
financial year in which the person wants to make contributions. Therefore, it can be said that the
Alice is eligible for making contributions in the superannuation as she works 30 hours each
month of the year. Therefore, she is permitted to make contributions.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.6
Could all employees benefit from salary sacrificing some of their salary into superannuation? Explain your
answer.
Question 1.7
Complete the following table to show that you understand the way that fund earnings are taxed in the
superannuation environment effective from 1 July 2017.
Earnings tax on income returns Earnings tax on capital returns
Accumulation phase 15% 15%
Transition to retirement income
stream phase
15% Upto 15%
Retirement income stream
phase
Tax free No tax up after the age of 60
years
Question 1.8
An example of salary sacrificing reducing the marginal tax rate can be well understood when a
person earns $100,000 annually and wants to buy a car for his use. The car is worth $22,000 and
therefore has gone into a salary sacrifice agreement with this employer. Therefore, the $22,000
would be taken out of his pre-tax income and thereby putting the employee in a lower level of
tax bracket. This in a way reduces the marginal tax rate of the employee.
Salary sacrificing in to superannuation is beneficial for the employees as the amount that is the
sacrificed component of the total salary package is not counted as assessable income for tax
purposes. This means that it is not subject to pay as an employee goes (PAYG) withholding tax.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Explain the 'pension benefits cap'. What phase of superannuation does this cap apply to?
Question 1.9
Your clients are Mr and Mrs Jones. They are in their mid-50's and they are planning for their retirement in 10
years’ time. Mr Jones has a much higher superannuation balance than Mrs Jones and the pension benefits cap
is a concern for him in the future.
Explain the concept of 'contributions splitting' and how it could help Mr and Mrs Jones plan for the future.
The pension benefits cap refers to the benefits the individuals would receive financially when they
are retiring. It is essential that every citizen who is entering the phase of retirement requires with
the superannuation benefit requires to monitor the retirement cap. From 1st July 2017 $1.6 million
transfer balance cap shows the highest amount that one can transfer to the retirement phase in
order to support the super pension. This cap is applicable in the initial phase of superannuation so
that the super benefits can be understood and a proper manner and the maximum pension
amount can be attained.
Contribution splitting is the concept with the help of which the superannuation is distributed
among the spouse in order to gain financial security after retirement. Contribution splitting allows
the individuals to divide their concessional before tax contributions with their spouse. This
contribution consists of the employer and salary sacrifice contributions. This process would be
beneficial for the couple as this would provide them to share he various benefits that have been
given below:
Provides access to the low rate threshold for each individual if they are younger than 60 in which
the couple are.
Provides an efficient way of providing superannuation to a non-working or low income spouse
Pay for insurance premiums and other premiums for a non-working or low-income spouse
Provide superannuation benefits earlier by splitting contributions to the older spouse
Improve the client’s Centrelink position by splitting contributions to the younger spouse, or by
Protecting the member and their spouse from the effect of intended government proposals

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 1.10
Nicholas pays tax at a marginal tax rate (MTR) of 37% plus the Medicare Levy of 2%. What is the benefit of
receiving fully franked dividends in his SMSF compared with receiving fully franked dividends in his own
personal name?
Nicholas pays a tax at a marginal rate of 37% and a Medicare levy of 25. The benefit of receiving his
fully franked dividends in his SMSF rather than in his own personal name is that when Nicholas
receives the fully franked dividend in his SMSF, he is liable to receive a deduction in the amount of
tax he has to pay on his income. This has been due to the fact that an Australian company has to
pay tax to the government at a certain rate and only after that they provide dividends to their
shareholders. Therefore, the company receives a franking dividend also known as the imputation
credit. This credit is passed on the shareholders via the franked dividend. The tax credit varies from
company to company and this can be beneficial for an investor of SMSF who are looking to manage
their superannuation tax liabilities. After the passing on of the tax credits to the investors in the
SMSF they can be exploited to decrease the tax payable by the funds in the personal margin tax
and if the franking credit is more than the tax bill of SMSF, then the superannuation fund would
receive an extra credit in the form of a refund from the Australian Taxation Office after the
individual applies for a super fund tax return. Therefore, it is suggested that Nicholas receives the
dividend in his SMSF rather than in his personal name.

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Assessment Activity 2
Case Study
Superannuation
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer allof the following questions.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours

DFP Module 3 Assignment 170701
DFP+SMSF Module 3 Assignment 170701
Units: FNSASICU503, FNSFPL502, FNSFPL503, FNSSMS501, FNSSMS505, FNSSMS601, FNSSMS602,
FNSSMS603
Question 2.1
Lisa is 59 years old and has permanently retired from the workforce. She has come to your office to seek
advice in regards to her superannuation. Lisa has $350,000 in her superannuation accumulation fund which
comprises $70,000 as a tax free component and $280,000 as a taxable component (from a taxed source). Lisa
is planning to go on an extended overseas holiday with her daughter and would like to spend a year in Paris.
She has a few questions she wants you to clarify.
Provide a clear explanation to Lisa for each of the following.
a. Can Lisa access her tax free component first as she wishes to use the $70,000 towards her trip and would
rather keep the remaining $280,000 invested?
It is known that a person can access their superannuation after the individual reaches their
preservation age. In this scenario, Lisa is 59 years old and hence she was born before 1st July 1960. In
this case the preservation for her is 55 years. Therefore, it can be said that she can access her tax free
component and does not require paying tax for that amount.
b. How much of the total $350,000 can Lisa access as a lump sum withdrawal from her superannuation
accumulation fund, without having to pay any tax at all on that withdrawal?
As mentioned earlier, Lisa has attained her preservation age and she is even retired. However, as she
has is not yet 60 years old she would be taxed on her withdrawal and cannot withdraw the total
amount that is in the superannuation fund but can access a lump amount $200,000.
c. At what age can Lisa access all her funds tax free?
Lisa can access all her funds at a tax free rate when she attains the age of 60 years.