Retirement
What the looming super reforms mean for your retirement
The super reforms that will commence on 1 July will have significant consequences for all Australians. Now is the time to take stock of what is changing and understand what you can do to ensure a secure retirement.
What the looming super reforms mean for your retirement
The super reforms that will commence on 1 July will have significant consequences for all Australians. Now is the time to take stock of what is changing and understand what you can do to ensure a secure retirement.
Commencing on 1 July 2017, we will again see significant reform to superannuation with the intention to make the system fairer and more sustainable for all Australians. The environment will be more restrictive, the generous benefits we have seen in the past will not be afforded to Generation X and those that follow. However, all is not lost as there is no question that superannuation will remain to be a highly tax-advantaged investment vehicle to accumulate savings for retirement and provide income thereafter.
In breaking down the superannuation reform, it is clear that in the future individuals will need to be proactive and start planning earlier to get the best outcome in retirement. The interim period leading up to 1 July presents an opportunity to restructure your superannuation fund and take advantage of the current rules as they stand. The time to take action is now.
Accumulation phase – saving for a healthy retirement
Those saving for retirement will see the annual dollar limit which they can contribute to their fund slashed to $25,000 for concessional contributions and $100,000 for non-concessional contributions. Looking forward, to get the maximum benefit from the superannuation system, you should consider:
• Their ability to contribute in the current financial year; far more favourable contribution rules remain in place until 1 July.
• Making voluntary contributions to your fund earlier in life. Planning earlier for retirement will deliver greater value under the new regime. Each year you fail to use your full contribution eligibility, you will limit your ability to build wealth for retirement in the most tax-effective manner.
In addition, there will be greater opportunities by way of the low income superannuation tax offset and improved accessibility to make spouse superannuation contributions.
When contributing to superannuation, it is important to understand when you will be able to access your accumulated benefits and consider the age which you intend to retire from the workforce. Under the current rules, superannuation can be accessed at age 65 or at retirement after a compulsory preservation age which is 60 for most people.
Pension phase – funding your retirement
From 1 July 2017, an individual may only hold a maximum of $1.6 million in the tax-free superannuation mode known as pension phase. Fund balances in excess of the threshold must be held in an accumulation phase account which is subject to a tax rate of 15 per cent on fund earnings. Additionally, individuals with transition to retirement pension accounts will be levied with 15 per cent tax on investment earnings.
It is important to avoid blindly withdrawing funds from superannuation on the assumption that increased tax will negatively impact you. For most people, maximising your superannuation balance will remain the most tax-effective method to save and invest. Additionally, you should consider the following:
• The $1.6 million cap on pension assets is available to each individual. For couples, it may be beneficial to look to contribute strategically to equalise your superannuation balance with that of your spouse.
• Under the new rules, you may be required to hold multiple superannuation accounts and the costs of administration charged to your fund may increase. You should reconsider the vehicle in which you hold your superannuation and whether this remains the most appropriate for you. For example, an SMSF may be more attractive under the new regime as it will generally attract a fixed administration fee and adopt a single investment pool to support multiple member accounts.
The consequences of the new superannuation rules are far reaching. For instance, existing estate planning provisions may no longer have the intended effect. For this reason, professional advice and a strategic review of your superannuation and retirement plan may very well be the best investment you can make.
Michael Turner, associate advisor, Moore Stephens Victoria
Superannuation
Aware Super takes on Australia's gender retirement gap, aiming for financial equality
Aware Super, one of Australia's largest superannuation funds with a 70 per cent female membership, is on a mission to close the gender gap that sees women retire with 30 per cent less super than men ...Read more
Superannuation
Age Pension increase prompts Australians to review their finances
The increase in the Age Pension, which takes effect today, should serve as a prompt for many older Australians to ensure they're maximizing their income as cost-of-living pressures persist, according ...Read more
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more
Superannuation
Aware Super takes on Australia's gender retirement gap, aiming for financial equality
Aware Super, one of Australia's largest superannuation funds with a 70 per cent female membership, is on a mission to close the gender gap that sees women retire with 30 per cent less super than men ...Read more
Superannuation
Age Pension increase prompts Australians to review their finances
The increase in the Age Pension, which takes effect today, should serve as a prompt for many older Australians to ensure they're maximizing their income as cost-of-living pressures persist, according ...Read more
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more