FIN220 Task 2: O'Reilly Family Superannuation Fund Analysis

This report provides a comprehensive analysis of the O'Reilly family's superannuation strategy, addressing the requirements of FIN220 Task 2. The assignment focuses on establishing a Self-Managed Super Fund (SMSF), developing an appropriate investment strategy, and considering relevant legislative aspects such as in-house asset rules, borrowings, trustee/member eligibility, pension payments, and contributions. The report details the financial circumstances of Gerry O'Reilly, a self-employed dentist, and his family, including his wife Mary and their children. It examines various superannuation strategies, including concessional contributions, transition to retirement accounts, and account-based pensions. The analysis also includes calculations related to Gerry's mother's eligibility for age pension payments, considering both the assets and income tests. The report provides detailed projections of Gerry's super balance over a seven-year period, incorporating contributions, earnings, and tax implications. It also references relevant sources and legislation to support the financial advice provided.

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Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Question 4 A................................................................................................................................................ 2
Question 4 B................................................................................................................................................ 2
Question 4 C………………………………………………………………………………………………………….3
Question 4 D………………………………………………………………………………………………………….3
Question 4 A (Projections)………………………………….……………………………………………………….5
References.................................................................................................................................................. 6

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Question 4:
A.
Following the separation and in the time moving up to retirement (i.e. 7 years) Gerry’s super fund
account balance has grown at the rate of 8% per annum. (4 % growth and 4 % income) added to which is
his normal concessional assistances each year, his account balance after 7 years, presuming Gerry’s
Superannuation balance started at $ 750,000.00 and then he continued to contribute $ 25,000 p.a. as a
concessional contribution (for calculations,
I have assumed that Gerry made this as a lump sum contribution at the beginning of each period) he shall
have a final total balance after tax of $ 1,436,143.34 and he would therefore have paid $ 8,023.15 tax on
earnings and $ 3,750.00 tax on his contribution with a total tax paid being $ 11,773.15.
* workings and assumptions have been shown at the end
B.
Another super strategy that Gerry may be able to apply in the lead up to retirement is that Gerry can also
think of rolling over the rest of his accumulation super account into a transition to a Retirement account.
This shall allow Gerry to start extracting an income from his super account countenancing him to work
less.
However, since 1st July, 2017, Transition to Retirement (TTR) Rules have changed and incomes within a
TTR shall now be taxed at 15%.
Gerry may also contribute to his super account through Non Concessional Contribution. He may
contribute $ 100,000.00 p.a. or use the Bring forward rule. Through it, he can contribute $ 300,000.00 in a
year but then he is restricted to make a Non Concessional Contribution for three years.

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C.
Assuming here that Gerry retires after 7 years at the age of 65 and decides to convert his existing funds
to an Account Based Pension, Gerry’s minimum pension payment shall be 4% of his super balance and
here I have calculated it to $ 57,045.23 p.a. There is no maximum threshold to the amount Gerry can
withdraw in any year.
D.
And with the presumption that she is a single home owner with no dependents and is using Centerlink
data provided.
Gerry’s mother has only $280,000.00 of financial assets and therefore she will not need to take the
Assets Test into account.
Deemed earnings with financial assets of $ 280,000.00
For calculations, we have taken an assumption that her personal effects are not financial assets to
analyze the deemed income test.
Gerry’s mother’s fortnightly pension payments shall be $ 842.07
Calculation for Gerry’s mother’s entitlement under the asset test and income test:
Assessable assets; Assets test = Non - Applicable
Financial Assets = $ 280,000
Deeming Rates = ($51,200 x 1.75%) + ($228,800 x 3.25%)
= $ 896 +$ 7436
= $ 8,332 p.a.

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Total Deemed income = $ 8,332 p.a.
Fortnightly Income = Total annual deemed income / 26 weeks
= $ 8,332.00 / 26
= $ 320.46
Assessable income – Threshold amount = $ 320.46 - $ 172.00
= $ 148.46
Therefore; $148.46 / 2 person = $ 74.23
And because 50 cents is lost for each dollar above $ 172 pf,
Pension Payment = Full age pension (less) reduction amount of 50 cents for each dollar above threshold
= $ 916.30 - $ 74.23 = $ 842.07
Therefore, the eligible amount per fortnight as per the income test is $ 842.07

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* Q4. A) Projections:
PROJECTIONS
Gerry’s Super
Balance
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Opening Balance 750,000 828,322.50 912,440.87 1,002,783.99 1,099,812.50 1,204,021.13 1,315,941,19
Contribution Less
Tax @ 15%
21,250 21,250 21,250 21,250 21,250 21,250 21,250
Total Opening
Balance
771,250 849,572.50 933,690.87 1,024,033.99 1,121,062.50 1,225,271.13 1,337,191.19
Earnings 30,850 33,982.90 37,347.63 40,961.36 44,842.50 49,010.85 53,487.65
Earnings Less
Tax @ 15%
26,222.50 28,885.47 31,745.49 34,817.16 38,116.13 41,659.22 45,464.50
Growth 30,850 33,982.90 37,347.63 40,961.36 44,842.50 49,010.85 53,487.65
Total 828,322.5
0
912,440.87 1,002,783.99 1,099,812.50 1,204,021.13 1,315,941.19 1,436,143.34
Year 7 - Balance
Balance at - Year 7 1,436,143.34
Tax on earnings 8,023.15
Tax on contributions 3,750.00
Total Tax Payable 11,773.15

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References
Ato.gov.au. (2018). Non-arm' s length income. [Online] Available at:
https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Tax-on-income/Non-arm-s-length-
income/ [Accessed 21 May 2018].
Asic.gov.au. (2018). Giving financial product advice | ASIC - Australian Securities and Investments
Commission. [online] Available at: https://asic.gov.au/regulatory-resources/financial-services/giving-
financial-product-advice/ [Accessed 25 May 2018].