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

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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?

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?

c. At what age can Lisa access all her funds tax free?

Question 2.2

Lisa’s friend Sophie is 61 years old and she is considering meeting up with Lisa and her daughter for a few months in Italy. Sophie is also retired and she has a superannuation balance of $500,000 in an account-based pension which comprises $100,000 as a tax free component and $400,000 as a taxable component (from a taxed source).

Provide a clear explanation to Sophie for each of the following.

a. Both Lisa’s fund and Sophie’s fund are producing investment returns of 5% per annum. Are the investment returns treated any different for tax purposes in Sophie’s fund compared with Lisa’s fund?

b. What are the minimum and maximum amounts that Sophie must withdraw annually from her account-based pension?
c. If Sophie withdraws a total of $100,000 in the current financial year, will it come from the tax-free component or the taxable component?
d. How will the $100,000 withdrawal be taxed?

Question 2.3

Sophie’s friend Bethany is 59 years old and continues to work. Bethany’s superannuation balance of $400,000 is in a transition to retirement pension account and comprises $100,000 tax- free component and $300,000 taxable component (from a taxed source).

Provide a clear explanation to Bethany for each of the following.

a. Assuming that Bethany’s fund produces an investment income return of 6% for the 2017-2018 financial year, explain the tax treatment of the return.

b. If Bethany withdraws pension payments totaling $20,000 for the year, how will this be treated for tax purposes?

c. When Bethany turns 60 and continues to withdraw $20,000 for the year, how will the withdrawal be treated for tax purposes?