The Government’s superannuation reform package, announced in the 2016-17 Budget and coming into effect from 1 July 2017, is set to impact all Australians. People’s Choice Credit Union spokesperson Stuart Symons shares his tips on what to consider, in light of these changes, to help position yourself for a financially secure retirement.
1. Be proactive
“The new, more restrictive reforms do away with some of the more generous superannuation benefits we have seen in the past. Gen Xs, Gen Ys and Millennials will need to be proactive and start planning early to get the best outcome in retirement, and it is not advisable to let the contributions employers make to your superannuation be your entire retirement plan,” Mr Symons said.
“Superannuation is, and will remain, a tax-advantaged way to invest and accumulate savings for retirement – and one that can provide a decent income in your golden years,” he said.
“Consider making voluntary contributions to your fund sooner in life and planning earlier for retirement because each year that you don’t use your full contribution eligibility, you’ll miss out on a tax-effective way to build wealth for a healthier retirement.”
2. Understand the system
“Many of the changes that will come into place from 1 July may provide good opportunities for some Australians to maximise their retirement savings and earnings, and minimise the tax they pay,” Mr Symons said.
“For example, self-managed super funds may be more attractive under the new regime, as they will generally attract a fixed administration fee and adopt a single investment pool to support multiple member accounts,” he said.
“The new low income superannuation tax offset will provide up to a $500 refund of tax on concessional or employer contributions for those earning less than $37,000.”
“Note too, that the new cap on pension assets is for individuals – so couples may find it beneficial to think strategically about how they contribute to their and their spouse’s fund.”
3. Act now
“Those currently making additional contributions to their super will see the annual dollar limit which they can put into their fund reduced to $25,000 for before-tax contributions, and $100,000 for after-tax contributions,” Mr Symons said.
“While more favourable contribution rules remain in place until 1 July, consider your ability to contribute this financial year to get the maximum benefit from our current superannuation system,” he said.
4. Don’t panic
“While the super changes will affect all Australians – and particularly those above the new $1.6 million tax-free threshold – it’s important not to panic and react without due consideration,” Mr Symons said.
“Fund balances in excess of the threshold will be subject to a 15% tax on fund earnings, and levies on investment earnings may also apply,” he said.
“However, maximising your superannuation balance may still be the most tax-effective method to save and invest for most retirees, so consider your individual circumstance and understand how you will be affected before drawing down your super with the assumption that the reforms will negatively impact you.”
5. Talk to your financial planner
“The professional advice and strategic review of a qualified financial planner will ensure you receive the most benefit from both the current and new superannuation systems,” Mr Symons said.
“They will consider the impact of the superannuation rules as they apply to you and your unique circumstances, and will review everything from estate planning provisions to fund fees to ensure you’re best positioned for a prosperous retirement,” he said.
The information above is not advice and does not take into consideration your personal objectives, financial situation or needs (“your personal circumstances”). Please consider the relevant Disclosure Documents and your personal circumstances before making any decision to purchase products. Contact us on 13 11 82 with any questions, or visit your nearest branch to talk to a consultant.