ACCT2262 Superannuation & Retirement: A Detailed Case Study

This document presents a comprehensive case study focused on superannuation and retirement planning for a couple, Thomas and Jessica. Acting as a financial advisor, the solution assesses their current financial situation, goals, and objectives, and recommends a Transition to Retirement (TTR) strategy to optimize their retirement income and minimize tax implications. The analysis incorporates data from a client fact sheet and utilizes the MoneySmart calculator to project the outcomes of the proposed strategy, including superannuation fund requirements and retirement income projections. The solution details the rationale behind the TTR recommendation, highlighting its potential benefits in terms of reduced working hours, enhanced savings, and the ability to maintain their desired standard of living during retirement. Furthermore, the document includes superannuation planning considerations for both Thomas and Jessica, emphasizing the need to increase contributions to meet their retirement goals. Desklib provides students with access to similar case studies and solved assignments.

Running head: SUPERANNIUATION AND RETIREMENT
Superannuation and Retirement
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
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Covering Letter
Thomas and Jessica
Address Line 1:
Address line 2:
Date:
Dear Thomas and Jessica
I would like to thank you for the opportunity for setting up this meeting for taking financial
advice from us.
From the meeting and also client sheet data all confidential information was made available to us
which provided a clear understanding of your situation, goals, objectives and also your attitude
towards an investment.
It is to be noted that from the information which was provided by you we have formulated a
Statement of Advice (SoA). The SoA would be consisting of recommendations regarding
different situations which shows your goals and objectives and also your attitude towards risks
related to investments and also returns which is expected by you. The SoA would be analyzing
all the supporting materials which is provided by you and on the basis of the same
recommendations is to be provided. In case, any details have been missed out or not considered
please bring the same to our notice so that appropriate amendments can be brought about in the
SoA.
It is also brought to your notice that if the SoA is not implemented within a period of 30 days
than revision needs to be made into the statement of advice. I would be thank you again for
choosing our services and we will be looking forward to assist you in any way in future as well.
Yours faithfully

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Introduction
Role of an Advisor
The role of the adviser is to provide financial advice to the client and the objective of the
advisor is to ensure that the financial goals and objectives of the clients are given priority. The
advisor would be suggesting strategies and products so that the goals and objectives of the client
are fulfilled. The advisor would not act outside the scope of the client while providing advisory
services to the client. The advisor should have a bachelor’s degree and the specific financial
planning course qualification that would be sufficient in order to provide effective consultation.
It is to be also ensured that the financial planning course which should be registered with the
government of Australia.
Scope of Advice
The products and services which we are authorised to provide our opinion are financial
products which are normally Australian securities or International equities along with investment
options in balanced funds. We are also authorised to provide consultancy services to the clients
for mutual funds, shares and securities. The service of the consultant includes financial
consultation along with evaluation and assessment of the products where the clients have
undertaken investments in order to sustain their level of investment. The steps which would be
taken by use would be within the scope of services which the client want from us.
Reports aim
The report which is formulated has the following aims and objectives and the same are
listed below in details:
 The report would be stating the roles and objectives of the clients along future
expectations of the clients.
 The report would also be including recommendations which the client need to implement
so the goals and objectives of the clients can be achieved.
 The report would be demonstrating financial projections which would be supporting the
recommendations provided.

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Discussion
Goals and Objectives
As per the information which is provided in the client fact sheet, the following are your
objectives and needs which you want to be fulfilled:
 You want to make appropriate plans for your retirement and the plans needs to be
formulated considering a period of five years of time considering the financial year
2017/18.
 To pay off the mortgage amount which is due on your home by the time of your
retirement and also save an amount of $ 55,000 for meeting your desire to purchase a
new car and also go on a holiday trip with your family.
 You want the retirement planning to be in such a way that you have a retirement income
of $ 57,000 which would meet your expectations and needs.
 You want to provide $ 40,000 to each one of your children so that they can have a saving
plan of their own.
 In addition to this, you want to make changes with your super funds and in every step,
you want to ensure that your tax implications on the investments are low.
Current Situation
As per the current situation which is stated in the facts sheet shows that you are thinking
to plan your retirement for which you need adequate cash requirements in order to meet your
current standards of living. In addition to this, the fact sheet shows that you have income which
is based on salary income for both you Thomas and Jessica. Thomas, you are currently engaged
as electricians and you are currently self-employed while you, Jessica is engaged in a florist
business. As per the fact sheet which you have provided, Thomas you have a income of $
130,000 while you, Jessica have a income of $ 30,000. The major expenses which is incurred by
you are mostly mortgage expenses for the residence property and also the investment property.
In addition to this, you have a household expenses of total $ 42,000 which covers the total
expenses which is incurred by you both. A better presentation of the income and costs for both of
you is presented below:

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Current Position of Thomas and Jessica West

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Particulars Thomas Jessica Total
Salary $ 130,000.00
$
30,000.00 $ 160,000.00
Investment Income (gross) $ 4,500.00
$
9,500.00 $ 14,000.00
Concessional Contributions Super -$ 10,000.00 -$ 10,000.00
Personal Income $ - $ - $ -
Other Income $ - $ - $ -
TAXABLE INCOME $ 124,500.00
$
39,500.00 $ 164,000.00
Income Tax (approx.) incl Medicare Levy $ 36,187.00
$
5,174.50 $ 41,361.50
Net Income $ 88,313.00
$
34,325.50 $ 122,638.50
EXPENDITURE
Mortgage principle home (approx.) $ 28,500.00
Mortgage investment property (approx.) $ 8,250.00
Household Expenses $ 42,000.00
TOTAL EXPENDITURE (approx..) $ 78,750.00
Annual Income Surplus/Deficit $ 43,888.50
As per your requirement, you needed a monthly income of $ 79,000 which is not
currently meeting as per the presentation which is provided above. In addition to this, you have
specified that you would be requiring a sum of $ 57,000 after your retirement for maintaining
your current standard of living. As per the discussion we had earlier, it is clear that you want to
lower that amount of taxes which is paid by you on your earnings. This would be considered in
the recommendations which I would be developing for you. The forecast above shows that you
are meet up with your obligations effectively but are not able to maintain the required revenue
which you are expecting. This shows that you are currently not meeting the expectations which
you have set and therefore consideration is required to be made in the area. Therefore, this is an
area where you would be requiring advices in order to improve your current situation and also
appropriately make provisions for your future.
As per your asset positioning in the fact sheet which you have presented effectively
shows all the assets which you have including the investment property. The fact sheet also shows
the investments which you have made in your respective super funds and also the insurance
coverage which is provided by the same. The analysis of your position reveals that you require

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financial advice regarding retirement planning and also improve the net income so that a proper
standard of living can be maintained.
Proposed Strategy
I have analysed your financial situation and also considered the objectives and needs
which you have for future. I would like to suggest the Transition to Retirement option for your
case. This option requires the applicants to reach their preservation age. In your case, both of you
have reached your preservation age and therefore as per my opinion this option would be most
appropriate as this would help in improving your current position and also enhancing your future
position effectively.
In order to establish a TTR pension fund and transfer a portion from super fund into the
same. It would also be wise to keep a small portion of your savings in super funds so that
employer contribution and other contribution which you can make can be saved appropriately.
The option of TTR requires the clients to deposit a sum from the super fund in the pension fund
established. The TTR scheme would allow you to work for lesser working hours during these
five years period till retirement and appropriately contribute to your income. As per the current
situation of the market, you can expect a return between 4% to 10%. As per my opinion this
would help you to meet the net income requirement and also help in retirement period planning.
The TTR scheme though would be taking a portion of your savings in present but as your
retirement requirement is quite I anticipate that the same would be enough to meet you needs. As
per the information which you provided in the fact sheet, the after-retirement income which you
want to maintain is $ 57,000 and I believe that the same would be possible with TTR Scheme.
The only consideration which needs to be taken into account is that you would be having lesser
amount of funds in hand at the time of your retirement. But in my opinion that would be fine as
your requirement is not much and you would also be having some savings which would be
generated from your contributions and your employee contribution to your super funds. The
reasons due which I am suggesting TTR scheme is that the scheme has significant benefits such
as reduced working hours, appropriate savings during the time of retirement. The most important
reason which made me consider the TTR option as appropriate is after considering your current
needs and your expectations of a standard of living. The TTR option would enable you to
achieve the expected income marker in yearly basis and therefore you would be able to maintain

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your desired standard of Living. In addition to this judgement from the nature of investments
which you like to undertake, I believe that you both follow a balanced type approach while
making investments.
Money Smart Calculator
Superannuation Fund Requirement
Figure 1: Superannuation fund Requirement
Source: ()
The amount of the super fund which is required at the time of retirement is appropriately
shown above. The estimation of the super fund considers the income which is generated by the
client and important aspects such as employer and employee contributions to the super funds.
The estimation of the superannuation fund considers the present superannuation coverage which
you have and on the basis of the same determination of the estimated super funds which you will
at the time of retirement is considered.

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Figure 1: Total Retirement Planning for the Clients
Source: ()
The retirement planning graph which is presented above shows that the client is able to
generate the requirement amount of income following the recommendations which is provided.
This also shows that the client would be able to meet the expectations and Thomas and Jessica
would be able to maintain their standard of living appropriately. This would also be meeting all
the future objectives and goals which are set by the clients.
Superannuation Planning
As per the current scenario, Thomas you have a superannuation fund of $ 320,000 while
Jessica has a super fund of $ 2,60,000. As per the estimation of the Money calculator, Thomas
you need to increase your contributions to your super funds in order to effectively meet the
desired target for the future. As an indication from the client sheet which I received I believe you
both are not satisfied with the superannuation funds which you currently have. As far as I can

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understand, this is mainly due to the low coverage which you are getting and also because of the
tax consideration which is associated with the funds.
Thomas, you are self employed and therefore you have to manage your own funds and as
per the fact sheet most of the contributions are done by yourself for an amount of $ 10,000.
While in your case Jessica, your contribution to the super fund is $ 2,850. Now, there is a thing
which I would like to explain to you guys regarding superannuation funds. I believe that your
products are appropriate but you need to increase your contribution to the fund in order to
effectively save up appropriate cash which would be necessary for guys to maintain for the
future. There is a also a option of concessional super contribution which can help you to
effectively keep the tax liabilities concerning super funds limited. One of the concessional super
payments is the employer’s contribution to the superannuation funds which is not applicable in
your case Thomas as you are self-employed. The other popular option available to you is salary
sacrifice arrangements which can help you both to save a portion of your salary which would be
then be applicable to tax at a concessional rate or 15%. Salary sacrifice is an option which is
available to you both which allows you to keep out a portion of your salary which is pre-taxed
and the same can be contributed to your superannuation fund and the same would be treated as
concessional payments which is made by you. I would like to recommend this system to you as I
believe that this would help you to set up an appropriate fund for your retirement and also lead to
considerable amount of savings in the present. I would suggest to you Thomas that you proceed
with a salary sacrifice of $ 10,000 from your gross earnings while Jessica you would be
sacrificing an amount of $ 5,000 from your gross wages. This would be taken out from your
gross wages before any tax claims are made on the same. The regulations which have been
introduced in respect of super contribution would treat your contributions as concessional
contribution thereby lower rate of tax would be applied on the same. It is also to be noted that the
maximum contribution which you can make in such an option is $ 25,000 above which
concessional rate of taxation would not be applicable. In order to effectively show the outcomes
which, you can expect when you implement this salary sacrifice option, I have presented an
estimated forecast for your situation for the purpose of better analysis for your situation. The
forecast summarising your situation for now and when you adopt the salary sacrifice plan is
presented below:

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Current Position of Thomas and Jessica West
Without Salary
Sacrifice
With Salary
Sacrifice
Particulars Thomas Jessica Thomas Jessica
Gross Salary 130000 30000 130000 30000
Investment Income (gross) 4500 9500 4500 9500
Concessional Contributions Super -10000 0 -10000 0
Salary Sacrifice 0 0 -10000 -5000
Personal Income 0 0 0 0
Other Income 0 0 0 0
TAXABLE INCOME 124500 39500 114500 34500
Income Tax (approx.) incl Medicare Levy 36187 5174.5 29997 3097
Net Income Pay 88313 34325.5 84503 31403
Employer Super contribution 0 2850 0 2850
Salary Sacrifice 0 0 10000 5000
Concessional Contributions Super 10000 0 10000 0
Total contribution 10000 2850 20000 7850
Contribution Tax 1500 427.5 3000 1177.5
Net Super Contribution 8500 2422.5 17000 6672.5
Figure 2: Table showing Comparison for Salary Sacrifice option
Source: (Created by the Author)
The above table effectively presents the salary sacrifice option which is available to you
both and as the forecast shows that you will be experiencing a fall in the net income which is
available in your hand but you need to know that such sums are being accumulated in your super
fund for your better future. In addition to this, I have also suggested the Transition to Retirement
scheme in my advices and I guarantee that salary sacrifice strategy along with Transition to
Retirement scheme would work wonderfully with each other and effectively help you both to
save appropriate funds for maintain your standard of living and also taking care of your wish list.
Therefore, on the basis of the arguments which I have provided I would like you to take up the
salary sacrifice option as the same would be most favourable to you guys considering the current
scenario.