Taxes and pension

[Mac777]

I would just like to know whether anyone can fill me in on how basic personal income tax works in Aus?

Also how does retirement work? What are their pensions like? Can/should you invest in a pension in the same way as here and as much as what we should here?

Our broker is aiming for ten times our annual salary by the time we retire here. Is it as heavy there, etc?

Would like to start planning and would like to know what to do with my current investments here.

Thanks

[Jordy]

Australia doesnt have pensions. We have supers which is short for Superannuation.

Difference between Pension and Super

Basically what you put in, you get back with returns. I am sure the financial gurus on the forum will correct me if I am wrong but someone mentioned that you should not aim to have more than $500 000 at retirement because then you forfeit the government pension which is about $2000 a month. What you should aim for is have a paid off house and less than $500k in cash investment.

Will wait for the financial experts to comment...

[Mac777]

Is it mandatory or is your retirement in your own hands as it is here, unless of course you are happy with our minuscule state pension?

The article doesn't quite explain the schematics, only a few pros and cons from what I can see.

[21yearsoutofrsa]

http://en.wikipedia.org/wiki/Superannuation_in_Australia

Have a look at wiki's take on it

[AndreaL]

Here are the income tax rates http://www.ato.gov.au/Individuals/Income-and-deductions/How-much-income-tax-you-pay/Tax-rates/

And superannuation http://www.ato.gov.au/Individuals/Super/Compulsory-employer-contributions/Choosing-a-super-fund/

Most people prefer to be in Industry super funds. Here is an article about super, remember it is a contribution that your employer makes, currently equal to 9.25% of gross salary and will increse each year to 12% by 2019. You can also salary sacrifice (pay an additional amount yourself to top it up) but you really have to look at the pro's and cons, and you can pay an amount into your spouses super.

You should read as much as you can as there are tax implications for high income earners etc http://www.news.com.au/money/superannuation/make-the-most-of-the-new-dawn-in-superannuation/story-e6frfmdi-1226671884714

[Mac777]

Thanks a lot.

Seems super, in principle, operates much the same as pension funds here with some nuts and bolts differences but all in all not bad.

Taxes are heavy though. But I suppose the state benefits are what you pay for and they're far better than here so the money, I would guess, is definitely worth it.

It's so intense though. You take for granted how much you know and how familiar you are with your own little world and now reading up on how it all works over there is rather overwhelming. Purely because it's so different. The tough thing is having to learn it all over again.

I suppose the only cure for that will be time and practice. Hopefully nothing too costly though.

[Toitjie]

Andrea - on one of the links you gave they give the tax rates but say if you are a foreign resident you are not entitled to the tax-free threshold.

Are we who are permanent residents, from a foreign country, considered to be foreign residents?

[GideonVD]

Andrea - on one of the links you gave they give the tax rates but say if you are a foreign resident you are not entitled to the tax-free threshold.

Are we who are permanent residents, from a foreign country, considered to be foreign residents?

Those are most likely the 457 crowd who are on work sponsorships, so not PR.

[OubaasDik]

Andrea - on one of the links you gave they give the tax rates but say if you are a foreign resident you are not entitled to the tax-free threshold.

Are we who are permanent residents, from a foreign country, considered to be foreign residents?

No you are an Australian resident for tax purposes anyway. Even on a 457 I was an Australian resident for tax purposes.

[Mac777]

Those are most likely the 457 crowd who are on work sponsorships, so not PR.

That's what I thought as well but now I'm a little confused because it does not clearly define what an Australian resident is as opposed to a foreign resident.

Also, the tax differences between an Australian resident and a foreign resident are rather large.

[Toitjie]

That's what I thought as well but now I'm a little confused because it does not clearly define what an Australian resident is as opposed to a foreign resident.

Also, the tax differences between an Australian resident and a foreign resident are rather large.

I agree...its a little confusing. And the diference is huge. As long as Im considered a tax resident Im happy, but I would love to know who are the foreign residents

[Mac777]

Frankly, as long as I'm not one of them I'm happy because you pay almost double in tax.

[chzaau]

Here are the details on a tax resident and a non tax resident.

http://www.lewistaxation.com.au/tax/general/resident-for-tax-purposes

[Mac777]

"Phew"... Thank chzaau

That helps a lot. I can rest easy now. That 32% tax was heavy swallowing.

Tax tables look a lot better from an Australian residency point of view that's for sure.

[CLAREandANDRE]

Hi Mac,

Superannuation and retirement planning is a big question. There are investment options, risk profiles, tax strategies and a whole lot more to consider and that's after you've chosen your Super Fund. Highly recommend seeking financial advice with a full review upon arriving. Further, review your plan at least every few years. Funds change, laws change as do you needs and debt levels/family situations. Your bank will have a planner available for a free initial chat. Or you can talk with Financial Planning firms as well as directly with your Super fund. I recommend do both the chat with your fund as well as an FP as the fund will only be looking at you with their fund in mind. A non fund planner will run comparisons for you.

Cheers

[AndreaL]

We spent around four or more years on a 457 and were always classed as 'residents for tax purposes", essentially if you have spent more than 183 days or roughly 6 months in the country in the financial year you are a resident for tax purposes.

As far as I am aware, even if you were mistakenely taxed at a higher rate, as sometimes happens to youngsters who have not applied for a TFN, you would get that money back when you completed your tax return.