Profile Blog

 

Choice is inherently regarded as a good thing, particularly in these COVID-affected times when some of our basic choices have had to be suspended for the greater community good.

 

         

So last week’s passage through parliament of a Bill expanding the amount of choice in the superannuation system ought to be reason for a small celebration.

The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 finally provides near universal choice of super fund by breaking the nexus between certain industrial relations agreements and the ability of an individual worker to select their own fund to receive their superannuation contributions.

The superannuation system has much to thank the industrial relations system for. The foresight of key union officials back in the 1980s lead to the creation of today’s industry super funds. But with superannuation now holding around $3 trillion of Australians’ retirement savings the focus has shifted to improving the system’s efficiency and competitiveness as called out by a range of reviews from the Financial System Inquiry and the Productivity Commission.

The legislative changes made last week introduce a fundamental choice for some 800,000 working Australians – the right to choose the fund their hard-earned contributions are paid to.

Small decisions in superannuation can have big long-term impacts.

Choosing which fund to hitch your retirement savings wagon to is one of those decisions. Choosing to consolidate your multiple superannuation accounts into one is another.

While most workers already have the ability to elect which fund your employer pays your superannuation contributions into this piece of legislation applies to those who are under an enterprise agreement or workplace determination where their employer designates their fund.

The intention of this change is to give employees more control and choice over their superannuation and to encourage more engagement, with the hope that the number of individuals with multiple funds having their accounts eroded by two lots of fees will reduce over time.

Superannuation may not be deemed the most pressing issue on the agenda for those who are still far from retirement, but it has good reason to make the list. To ensure you can later live the lifestyle you want, paying attention to your superannuation now is vital.

One of the simplest ways to get on top of your superannuation is to choose to consolidate it all into the one account. Many of us will change jobs several times in our lifetime and may have already accumulated a few default accounts selected by our past employers. By sticking to just one super fund or consolidating your accounts regularly, you avoid paying multiple account fees and insurance premiums. These fees may not seem costly at first, but over time, they will inevitably eat away at your superannuation balance. Consolidating your superannuation also allows you to know exactly how much you have in your fund at any given time.

When consolidating super funds take the time to understand the insurance benefits and options offered by each fund to make sure you are not walking away from valuable insurance cover.

For those people who have not had the ability to choose funds previously it is also worth reframing the way we view superannuation in our minds. Because we cannot usually access it until retirement and contributions are generally paid directly into our accounts by our employer, there is a tendency to view it as money we don’t yet own or control – particularly in our younger years when the account balance is building slowly.

There is a lot of discussion in the superannuation industry about member engagement. Being engaged with your super is smart but it doesn’t mean you have to suddenly have a view on investment markets or to directly control where your money is invested.

This is where an abundance of choice can work against you. Vanguard has produced a research report titled How Australia Saves and one of the key findings was that fund members who exercised investment choice over a 10 year period actually underperformed those members in the default MySuper portfolio offered by the funds in the survey.

So when exercising choice of fund understand that there are many well-diversified default superannuation options on the market so letting the professionals manage the portfolio is usually the best option for most fund members.

The bottom line is that superannuation is simply a concessional tax structure wrapped around your retirement savings where the federal government is offering tax concessions as the trade-off for locking those savings away until the time of retirement.

So mentally put it in the long-term savings bucket by all means but give it the same amount of attention you normally pay to your other investments. This means understanding your retirement goals, the costs you’re paying, and the investment strategy you’ve selected so that your money is being utilised in a way that best suits you.

 

Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
01 September 2020
vanguardinvestments.com.au

 

 

The government’s early super release scheme shows no signs of slowing down, with almost 90,000 release applications received by super funds in the first week of August and more than $700 million in payments made.

 

       

The latest APRA statistics for the week to 9 August revealed that 88,000 applications were received by funds, with 44,000 being first-time applications and 44,000 repeat applications.

There have been 4 million applications since the start of the scheme, with 1.1 million of those being repeat applicants, APRA said.

The scheme has now paid out $31.1 billion, with an average payment size of $7,689.

A total of 139 of the 175 funds in APRA’s reporting scheme have made repeat payments to members, with the average size of repeat payments being $8,487.

The top 10 highest paying funds in the scheme — including AustralianSuper, Sunsuper and REST — have paid out $20.4 billion of total funds released in the scheme.

 

 

Sarah Kendell
18 August 2020
smsfadviser.com

 

 

The rules around Superannuation contribution change almost every year, so it is important that taxpayers know what these changes mean to them.

 

         

The following outlines what has changed.

An increase in the age required for the work test.

From July 1, 2020, the age required rose from 65 to 67. The main benefit of this change is that it provides, where possible, an additional opportunity to implement voluntary super contribution strategies.

What taxable contributions can be made for the year ending June 30, 2021?

There is a cap of $25,000 per person for those able to make extra contributions to their super during the 2020/21 financial year. Any excess over this concessional contribution (CC) cap is taxed at the inpidual’s marginal tax rate.

CCs are contributions where a tax deduction is claimed and include:

  • Superannuation guarantee contributions (SGCs)
  • Employer voluntary / extra contributions like salary sacrificing
  • Member taxable contributions claimed as a deduction in personal ITR.

The CC cap will, in most cases, exceed employer contributions in 2020/21. If this is the case, then consideration could be given to adding personal taxable contributions to get you up to the $25,000 limit.

The higher your income, the greater the tax savings and keep in mind that there is no upper age limit for being eligible to receive SGCs.

Carry forward provisions

An indivdual can carry forward CCs if their total superannuation balance (TSB) is less than $500,000.

Unused contributions can be carried forward for five years. This option came into effect in 2019/20.

An important consideration prior to June 30, 2021 is to see if you can utilise this carry forward option to bolster your CCs before the date noted.

Work test

If an inpidual is under 67, there is no work test required to be able to make a contribution.

The work test is where, once you turn 67, you must be able to show that you have been gainfully employed for 40 hours or more in any 30-day period in a financial year.

If an inpidual is between the ages of 67 to 74, they must meet the work test in order to make a contribution.

Splitting of contributions

An inpidual can split their CCs that are made on their behalf to a spouse but they need to meet certain requirements.

The main reasons to split contributions are to:

  • Assist with the limit of only being allowed to have $1.6 million to start an account-based pension with
  • Assist with ability to make non-concessional contributions (NCC) given the cap limit also of $1.6 million
  • Assist with the ability to use the carry forward provisions given the member balance cap of $500,000
  • Address age differences between spouses and the ability to access benefits at an earlier date
  • Access Centrelink advantages by minimising a member’s account
  • Allow a member to have sufficient superannuation to be able to pay life insurance.

Spouse rebate for super contributions

A spouse rebate, up to a maximum of $540, can be claimed for superannuation contributions for the year ending June 30, 2021.

If your spouse earns less than $37,000 per year and you contribute $3,000 into superannuation for them, you can claim a tax rebate of $540.

Spouse contributions can be made if you are aged under 75 from July 1, 2020.

What tax-free contributions can be made for 2020/21?

Non-concessional contributions (NCC) are those contributions made into a super fund from after tax income. In this case, an inpidual is not claiming a tax deduction. There is a cap for NCCs of $100,000 for the 2020/21 year.

Members under 65 have an option to contribute up to $300,000 over a three-year period, depending on their total superannuation balance (TSB). The rule works as follows:

TSB                        NCC and bring forward amount

< $1.4M                 $300,000 over 3 years

> $1.4 & < $1.5M   $200,000 over 2 years

> $1.5 & < $1.6M   $100,000 over 1 years

> $1.6M                $0 (nil)

To be able to make an NCC, a member must meet the work test, as described above.

The increase from age 65 to 67 also impacts on the ceasing work contribution rule as of July 1, 2020 by given more time to make a NCC.

NCCs can be made on a once-off basis in the financial year after you have ceased employment if your TSB is less than $300,000 as of June 30 in the previous financial year. You also need to be under 75.

Downsizing contributions and how this applies to those over 65 years of age.

From July 1, 2018, anyone 65 years or older can make a downsizer contribution of up to $300,000 from the proceeds of selling their residential home.

The contribution is not an NCC and does not count towards the contribution caps, so it goes into superannuation as a tax-free contribution.

If a member has more than $1.6 million in superannuation, they are still allowed to make a downsizer contribution.

If the downsizer contribution is made and is placed into retirement phase, it will count towards a member’s transfer balance cap, which is $1.6 million.

If you are thinking of downsizing then speaking to a financial planner will help clarify eligibility requirements.

Get more from your super

If you have any questions on the above then simply ask us.

 

 

 

With the ending of a number of the original COVID-19 relief and stimulus initiatives, August and the beginning of September has seen the release of new plans to move into the post-September period. Links to these updates and changes are listed below.

 

     

 

Please click on the following links to access a wide range of Covid-19 related updates, initiatives, guidelines and resources from both Federal and State Governments.

 

Latest Updates:

 

Previous Updates:

 

  • Articles and Updates in other Latest News articles including:
    • Stage 3 – Covid-19 $1.1billion Domestic Violence, Medicare and Mental Health.
    • Stage 2 – Covid-19 – $66 billion stimulus package.
    • Stage 1 – Covid-19 Update – Small Business
    • Stage 1 – PM launches $17.6 billion virus stimulus plan

Several new links have been added to the many already in this article, links that date back to the beginning of the COVID-19 pandemic.  If you have any questions, or require further assistance, please send us an email or phone.

     

Please click on the following links to access a wide range of Covid-19 related guidelines and resources for both Federal and State Government initiatives. Once done, click on the X (top right) to close the article and you’ll return to this list. NB: Internet links are often altered by the source which means some of the following might not link properly. Ongoing testing is done to try and ensure this problem is minimised.

Latest Updates:

Previous Updates

 

 

 

    • Click here for the latest coronavirus news, updates and advice from government agencies across Australia.

 

  • Articles and Updates in other Latest News articles including:
    • Stage 3 – Covid-19 $1.1billion Domestic Violence, Medicare and Mental Health.
    • Stage 2 – Covid-19 – $66 billion stimulus package.
    • Stage 1 – Covid-19 Update – Small Business
    • Stage 1 – PM launches $17.6 billion virus stimulus plan
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