FIN220 Assessment: Superannuation Case Study and Financial Advice

This case study analyzes the superannuation needs of clients Robert and Jillian Buckett, focusing on their retirement goals and financial situation. The solution demonstrates a deep understanding of superannuation regulations, including the roles of ASIC, ATO, and APRA, and explores the benefits and limitations of super funds. It provides detailed advice on concessional contributions, tax implications, and access to funds, with calculations on potential tax savings. The document also covers the necessary documentation for financial advice, employer responsibilities, and super guarantee charges. The case study offers a comprehensive overview of superannuation, providing practical financial advice and insights into retirement planning strategies, aiming to help the clients achieve their retirement goals by making informed decisions about their superannuation investments.

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Q.1
(A)
A super fund is nothing but a kind of trust. It is managed by individuals who regulate the trust
fund that is trustees. A super fund is regulated by its trust deed.
A super fund is designed with a purpose of allowing an individual to remain financially
independent in his retirement phase and as well as providing financial support to the
beneficiaries of an individual in case if he cease to exist.
(B)
The sole purpose of key legislation governing superannuation in Australia is to make sure
that super funds function efficiently and systematically and for this very purpose, the same
has confirmed various guidelines, rules and regulations (Hein &Chamarstrw, 2018).
(C)
Australian Securities & Investments Commission (ASIC), Australian Taxation Office (ATO),
and Australian Prudential Regulation Authority (APRA) are the bodies that are entirely
responsible for the regulation of superannuation in Australia.
The role of Australian Securities & Investments Commission (ASIC) is to enhance the
functioning of the financial system and all the companies operating in it.
The role of Australian Taxation Office (ATO) is to direct the taxation of all the
superannuation funds and control the self-managed superannuation funds (SMSF).
APRA is responsible for systematic functioning of super funds and ensures that the super
investments are safeguarded by means of necessary disclosures and compliance with the
independent requirements. (Davies, T. and Crawford, 2018)
(D)
There are a lot of benefits arising out of investing in superannuation funds. The benefits
derived by Australian’s from investing in superannuation funds with respect to wealth
accumulation and living the retirement years with dignity includes-
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• Offering a tax efficient income stream in retirement years as the superannuation
offers tax exempted withdraws once the member crosses 60 years of age and above.
• The interest accumulated and earnings made from the investments in
superannuation funds as well as concessional contributions shall not be taxed at
marginal tax rate rather the same shall be taxed at mere 15 percent.
• As it is a compulsion on the citizens to make investment in superannuation
funds, therefore, it is of great help for such individuals who are not well versed with
saving money. This forced saving practice shall help the individuals in their
retirement phase by keeping them financially independent (Leow & Murphy, 2017).
(E)
The shortcomings of superannuation funds are listed below-
• The benefits from these funds cannot be used by the respective account holder
prior to his retirement.
• If the account holder wishes to retire before the age of 65 then he shall not be
allowed to derive benefits from his super funds.
• An individual cannot annually contribute more than $25,000 to his or her super
fund as he is confined to the concessional contributions cap.
• People falling below 65 years of age can only make contributions or participate
in the superannuation funds.
(F)
There are ample reasons to back up the recommendation in investment in super fund. By
making concessional contributions, Robert can easily lower the amount of tax that he shall
have to pay otherwise. Robert makes $1,80,000 annually and is not eligible for a low income
superannuation tax offset. (Douma & Hein, 2011).
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There are ample reasons to discourage investment in super fund. The benefits can be derived
from super funds only when the condition of release it met. The laws and legislations
concerning the superannuation funds are ever changing which can make it troublesome on the
individual’s part (Leow & Murphy, 2018).
Q.2 The documents that Robert and Jillian are required to be submitted to ASIC with respect
to specific circumstances by the adviser during the advice process are;-
• SOA – The Statement Of Advice provides every single information that is
required by the client in the process of making an appropriate decision. It is required
when a personal advice is shared (Summers, J. & Smith, 2019).
• Product disclosure statement – It must be issued to the client as soon as the
advice is offered. It offers all the information pertaining to a financial product such as
its risks and related benefits.
• Financial Services Guide - It carries all the information that may be required by
the potential users with respect to constructing decision pertaining to a specific
provider. It must be issued soon after the contact has been made.
The main purpose of such documents is to ensure proper compliance and to aware the
client with the information that is necessary. Detailed information relating to the
product is mentioned in the documents so that the users can make themselves familiar
with the relevant details. Further such details aids in smooth decision making.
The employer is required to play the important roles such as payment of super
contribution for the employees those are eligible by the mentioned cut off dates every
quarter. Secondly, the employer should ascertain that whether the employees are
eligible for the selection of super fund. Furthermore, the employer should provide the
eligible employees with a standard choice form.
It is necessary that the employer is required to pay 9.5% super guarantee to the
superannuation fund of the employee. It is imperative that the employer should have
salary sacrifice arrangements that enable the employees to stress upon a selected
choice fund.
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Q.3
If the sacrifice arrange is into action then the Robert employer can make contribution of the
employer like accessible contribution and contribution of concession. Robert can even make
contribution of concession like personal contribution and contribution of non-concessional
nature.
It needs to be noted that every employer and concessional contribution are subjected to tax at
15% and not the marginal tax rate of Robert. Non-concessional contributions are those
contributions that are already subjected to tax and comprises of no further implications of tax
when provided in super. Even the tax deductions can be claimed by Robert for personal
contributions (Kruger, 205).
Q.4
The limitations that apply to accessing the funds invested in superannuation are;-
The shortfall that applies while accessing the funds that is invested in the superannuation are:
A condition of release should be meet by both Robert and Francis. One of the major
condition of release is the attainment of age 65 years. The other condition comprises of :
 Retirement after the age of preservation
 Employment termination after attaining the age of 60
 A terminal medical scenario where two medical experts certifies that the person
condition is critical and will lead to death in a span of 60 years
 In the case of death, the funds will be provided to the beneficiary who is nominated
 Grounds of compassion and needs to be approved by the Human services
 During times of financial hardship that is receipt of income support payments for a
consecutive period of 24 weeks and not able to meet reasonable and other family
expenses. (Eccles, R.G. & Youmans, 2015)
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Q.5
Considering the assumption that Robert will be in a position to save the concessional
contribution limit every year and no other deductions, the tax that will be saved by Robert if
he wish to salary certificate the maximum amount to the superannuation fund and taking it as
income 5500$.
The computation is as follows:
Limit of Concessional contribution = $25,000
Tax rate – 15%
Hence, 15% of 25,000
=$3750
It is considered that $25000 will be subjected to tax at the MTR and 37% rate of tax is the
maximum one that Robert can be taxed to.
Marginal Tax Rate (MTA) that is 37% of 25,000
=$9250
Thereby, tax savings = 9250-3750=$5500
Overall tax savings will be $5,500
*note the concessional limit is $25,000 irrespective of age and is the maximum amount of
concessional contribution that can be added into the super fund.
Q.6 (a) the overall Super guarantee charge (SGC) that needs to be paid by the employer
As per the computation,
Total payment every quarter = Total p.a / number of quarters is a year
$180000/4 = 45000
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45,000 X 9.5%=$4275
SG = $4275
Interest=$4275 X 10% = $427.5
Administration fee=$20 –its assumption for 1 quarter (Q1)
Q3 (Third quarter) = SGC = $4702.5
Q4 (Fourth quarter) = 10% X $4702.5= 470.25
Hence,
Overall payment in Q3+Q4+Admin fee=Total SGC payable by the Employer
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4702.5+470.25+20=&5192.75
Hence payment by the employer will be $5192.75
(b) Implication of tax by the employer
The employer will not get a deduction of tax for the super guarantee in the payment is made.
This is due to the fact that in case of late employment the tax deduction is not to be received
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Conclusion
Overall, it can be commented that both employer, as well as Robert can make contribution to
Superannuation. This helps in the accumulation of funds when the age of retirement is
reached
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References
Davies, T. and Crawford, I. (2012) Financial accounting. Harlow, England: Pearson.
Douma, S and Hein, S. (2013). Economic Approaches to Organizations. London
Eccles, R.G. & Youmans,T. (2015) Materiality in Corporate Governance: The Statement of
Significant Audiences and Materiality, Boston: Harvard Business School, working paper 16-
023, Available from: http://hbswk.hbs.edu/item/materiality-in-corporate-governance-the-
statement-of-significant-audiences-and-materiality [Accessed 6 June 2019]
Kruger, P. (2015). Corporate goodness and shareholder wealth. Journal of Financial
economics, 15(2), 304-329. Available from:
http://www.sciencedirect.com/science/article/pii/S0304405X14001925 [Accessed 6 June
2018]
Leow, J& Murphy, S. (2017) Australian Master Superannuation Guide. CCH Australia
Limited, Sydney, NSW 2001.
Summers, J. & Smith, B. (2014) Communication Skills Handbook 4th Edition, Son Australia
Ltd, Milton Qld.
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