FP5eQCh17 - Problems with Guided Answers by Graeme Colley...

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Financial Planning in Australia 5e Problems Ch17 Page 1 Problems with Guided Answers by Graeme Colley © 2013 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing or distributing any material from this website for any other purpose requires written permission from the Publisher. Chapter 17: Superannuation and Retirement 1 Van, who is 59, was born on 1 July 1953. He has $1,100,000 in his superannuation fund, consisting of $300,000 in non-concessional contributions. He has decided it is about time to begin receiving his superannuation benefits and wants to take a lump sum to pay off his mortgage, buy a new car and pay some debts. The amount he needs is about $430,000. Whatever remains in superannuation after payment of the lump sum he would like to commence an income stream. Advise Van on how he could receive his superannuation benefits in the most tax-effective way. There is no one correct answer to this question as the ultimate decision will depends on Van’s situation. If Van has met a condition of release such as retirement, he will be able to access all of his superannuation without any restrictions. However, if he has not retired, he will only be able to access the unrestricted non-preserved component of his superannuation, or a combination of his unrestricted non-preserved component and the remainder of his benefit could be received as a transition to retirement pension. Let’s compare two possible strategies: Strategy 1 will look at the situation in a reasonably simple way, assuming a lump sum as required by Van will be paid and the remainder will be paid as an account- based pension. Strategy 2 will consider the situation in which Van will withdraw an amount from superannuation which will include the tax free and taxable components. He will then contribute that amount back to the fund as a non-concessional contribution, which is possible as he is under age 65 and is not required to meet any work tests. Both strategies assume Van has retired and meets a condition of release so that all of his benefit is unrestricted non-preserved. Strategy 1 Draw a lump sum of $450,000
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