Cutting the crust of Trans-Tasman tax

You will need to declare the income here. However, the Australia and New Zealand tax treaty (the key points of which are available on the ATO website) states that in the case of a trust, double tax relief will be allowed by the country of residence (Australia in your case) for any tax imposed by the other (New Zealand).

If you want to get more details, you will need to sit down with a tax accountant and show the breakdown of the proposed trust distribution.

SAVE BY NOT SACRIFICING

I turned 60 in March of this year and earn about $26,000 on a permanent part-time basis, of which I salary sacrifice 99 per cent. I also receive a government pension of $29,500 annually, which is now not assessable as income for tax purposes. Given the new tax scales in 2012-13, what is the optimum amount that I should sacrifice for the financial year? That is, at which point does sacrificing offer no advantage to me? T.M.

The last time a letter was published here discussing a "government pension", there was a flurry of complaints about its size, so we should point out that this is a superannuation pension and not a Centrelink pension. Since it is non-assessable, it would be a state rather than a Commonwealth super pension.

The maximum you can salary sacrifice in 2012-13 is $25,000 although, mathematically, it would not be in your interest to do so. To explain, when you salary sacrifice, the total amount going into the super fund is taxed at 15 per cent.

If, instead, you pay tax on your personal income this financial year, the first $18,200 is untaxed and the next tax bracket of 19 per cent applies to income from $18,201 up to $37,000. The Medicare levy of 1.5 per cent applies from $24,167.

Your optimum situation, then, is to salary sacrifice just the balance above $18,200, or $7800. If you want to contribute the remaining untaxed amount into your super fund, it can go in as a non-concessional contribution and not be taxed on entry, always assuming you have not exceeded the $450,000 cap in the past three years.

FINE POINTS OF FEES

I am a single female retiree and not gifted in things mathematical or financial. My financial adviser some years ago placed me into two super funds, one being an allocated pension and the other a managed fund, both with the same fund manager. In the present economic climate my capital is fast eroding, especially with the fees my financial adviser gets and the fund manager's fees. Am

I entitled to claim the trailing commission at the expense of the financial adviser? C.M.

You are able to disassociate your investment from an advisory firm and either request that no adviser be appointed or appoint another one of your choosing. Trailing commission, usually between 0.4 per cent to 0.6 per cent a year, is paid out of the fund manager's fees so, if no adviser is appointed, the fund manager simply retains the management fee.

Most current managed funds offer an "adviser service fee" which you, as the client, agree to pay to your adviser and which is shown on your regular fund statements. In such cases, the fund manager's fee is reduced, or should be.

However, the newly introduced Future of Financial Advice, or FOFA, rules have seen a swing away from either trail or service fees paid by managed funds. Instead, advisory firms, most of which are now owned by banks and insurance companies, have converted to a "portfolio service" structure where the entire portfolio is left with the adviser for a fee charged as a percentage of assets, up to about 1 per cent a year.

The portfolio then invests in direct investments such as term deposits, shares or bonds, as well as wholesale funds that should pay no fee to the adviser.

In addition, super funds are able to now offer limited advice over the phone to their fund members while accountants are to be offered ASIC licences allowing them to give financial advice on SMSFs and "class of product" advice about superannuation products, securities, insurance and basic deposit products. The licences will be offered from July 2013 with a three-year transition period.

The corollary to this is that there is a decreasing availability of one-off, good-quality and unrestricted independent advice at a reasonable price which, one could argue, was the ultimate goal of the recent changes.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.