FAQ

The frequently asked question page or FAQ is the accumulation of financial questions from clients and around the web. It has been broken down into few broad topic areas to help improve your knowledge of finance. This page is always growing so be sure to check in to gain new insights into our most frequently asked questions.

Do you have a question about finance? Send us a message via our contact form and we can either answer it on this page or answer it over the phone.


What's the difference between superannuation and life insurance in Australia?

Superannuation is a tax effective way to save for your retirement. In simple terms it is a government mandated form of savings to enhance self-funding when you retire. There are many ways to invest the funds to maximise growth and get the best outcome. Remember it is your money and you have the ultimate decision how the funds are invested and managed. You do not have to take the default fund your employer offers nor the investments. Generally, you will not be able to access this money until you retire. Your employer will make contributions to your super fund and you can top it up with your own money. The government may also make contributions if you are a low-income earner.

Life insurance is an insurance policy to protect your family, loved ones, cover debts or business interests. Should you pass away the insured amount is made available based on your final wishes or commercial contracts you have in place. It is quite simple you pass away, meet the insurers definitions and the funds are paid.

Both products are mutually exclusive but can also be linked in funding life insurance.

Always seek professional advice to get the best outcome, tax and investment effectiveness.


Is life insurance compulsory in Australia?

Life insurance is not compulsory in Australia however it a cost-effective option to protect your family, loved ones, cover debts or business interests. Should you pass away the insured amount is made available based on your final wishes or commercial contracts you have in place. It is quite simple you pass away, meet the insurers definitions and the funds are paid.

It is highly recommended to get your insurance underwritten when you make the purchase. This gives more clarity around the definitions and actual cover. This is more superior than less expensive products that underwrite at time of claim leaving some ambiguity as to whether the claim will be paid.

Other types of personal insurance are income protection, total and permanent disability and trauma / critical illness.

Should you pass away it is your responsibility to ensure your families well being ensuring they are secure should there be a claimable event. Rather pay the mortgage than sell the house.

Always seek professional advice to get the best outcome, tax and investment effectiveness.


Can a person in Australia draw on superannuation to pay off a credit card debt of about $30,000?

There are some very limited circumstances when you can access your super before you reach your preservation age:

Incapacity - if you suffer permanent or temporary incapacity.

You may be able to access your super if you are temporarily unable to work or need to work less hours because of a physical or mental medical condition.

You will receive the super in regular payments (income stream) over the time you are unable to work. A super withdrawal due to temporary incapacity is taxed as a normal super income stream.

Severe financial hardship - You may be able to withdraw some of your super if you have received eligible government income support payments continuously for 26 weeks and are unable to meet reasonable and immediate family living expenses.

* A super withdrawal due to severe financial hardship is paid and taxed as a super lump sum.

* The minimum amount that can be paid is $1,000 (unless your super balance is less than $1,000) and the maximum amount is $10,000. You can only make one withdrawal from your super fund because of severe financial hardship in any 12-month period.

* There are no cashing restrictions under severe financial hardship if you have reached your preservation age plus 39 weeks and you were not gainfully employed on a full-time or part-time basis at the time of application.

Compassionate grounds - to pay for medical treatment if you are seriously ill.

You may be allowed to withdraw some of your super on compassionate grounds. Compassionate grounds include:

* paying for medical treatment for you or a dependant

* making a payment on a loan to prevent you from losing your house

* modifying your home or vehicle for the special needs of you or a dependant because of a severe disability

* paying for expenses associated with a death, funeral or burial of a dependant.

Terminal medical condition - if you have a terminal illness or injury likely to result in death within 2 years, as certified by two registered medical practitioners, at least one of whom is a specialist. At least one of the registered medical practitioners is a specialist practising in an area related to your illness or injury

Contact your super fund to request access to your super due to a terminal medical condition. Your fund must pay your super as a lump sum. The payment is tax-free if you withdraw it within 24 months of certification.

If your fund does not allow access due to a terminal medical condition, you may be able to move your super to a different fund.

If you are suffering from a terminal medical condition and you have a super credit balance held by the ATO, you can either ask your fund to claim this on your behalf, or you can claim it directly from the ATO yourself.


Which is the best performing superannuation fund in Australia?

How long is a piece of string?

Performance is one of the key aspects in any investment however other considerations are tax effectiveness, risk profile and tolerance, the end date or withdrawal date, ethical or choice of investment and fund liquidity. Also, is the fund true to label and are the comparative funds similar and able to be compared fairly.

To understand more abut how to determine the correct superannuation fund for you, check out an article featured in The West Australian by one of our director's, Dan Hewitt (see link).


How does superannuation work in Australia?

Superannuation is a tax effective way to save for your retirement. In simple terms it is a government mandated form of savings to enhance self-funding when you retire. Currently your employer is required to make super guaranteed contributions (SGC) of @ 9.5% based on your gross. Super is made up of employer contributions, your own personal contributions and sometimes additional Government contributions. The aim is to grow your account balance while you are still working. When you have reached retirement age and stop working, your super fund is usually converted to a pension that will give you money to live on.

There are many ways to invest the funds to maximise growth and get the best outcome. Remember it is your money and you have the ultimate decision how the funds are invested and managed. You do not have to take the default fund your employer offers nor the investments. Generally, you will not be able to access this money until you retire.

If you are eligible to receive super contributions, your employer must put super contributions into your super account. Contributions should be equal to 9.5% of your 'ordinary time earnings'. For example, if your ordinary time earnings are $50,000 then you should be paid an additional $4,750 into super. Ordinary time earnings are what you earn for your ordinary hours of work including over-award payments, bonuses, commissions, allowances and certain paid leave.

You are eligible to receive super from your employer if:

* You earn $450 or more in a month

* You are aged 18 or older

* If you're under 18, you must also work more than 30 hours a week.

*There are certain tax considerations if you are a high-income earner and caps on concessional and non-concessional contributions. Always seek professional advice to get the best outcome, tax and investment effectiveness.