FIN2106 Lecture Notes - Lecture 7: Small Business, Terminal Illness, Australian Workplace Agreement
FIN2106 – Module 7
- Introduction
oSuperannuation is a long term savings method to provide members with money to live on in
retirement
oAs the population ages, there will be fewer people in work to support those who have
retired
oThe government introduced superannuation to enhance savings rates to supplements the
age pension that people receive
- Historical Background
oNo uniform regulation of superannuation for the most part of the 1900’s
oSuperannuation guarantee system introduced in 1992 requiring employers to contribute
towards employees’ superannuation
oSuperannuation Industry Supervision Act was introduced in 1994 providing most of the
current superannuation rules
oAPRA established in 1997 to regulate superannuation funds
oSweeping changes to simplify superannuation rules introduced in 1 July 2007
- Stages of Superannuation
oContributions
oAccumulation
oBenefits
Lump sum
Retirement income stream
- Advantages of Superannuation Investment
oLow tax rate of 15% on investment earnings
oSuperannuation benefits tax-fee from age 60
oForm of forced savings
oSpecial group life and disability insurance available
oMaximum compounding
oProfessional management
- Disadvantages of Superannuation Investment
oLack of access to funds
oThe asset in the fund generally cannot be used as security for a loan
oContinuing changes to the rules
- Regulation of Superannuation
oSuperannuation Industry Supervision Act 1993 – principal legislation that regulates the
operation of superannuation funds
oSole purpose test – superannuation trustees should ensure that the fund exists solely for the
purpose of providing retirement benefits for members
oGovernment bodies involved in the administration of the SIS Act: APRA, ASIC, ATO and SCT
oSuperannuation investment standards
In house investment
Acquiring assets from members and other related parties
Limits on fund borrowings
Limited recourse borrowing arrangements
Collectable and artworks
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