#1 fund for weathering market ups and downs3
SuperRatings' Pension of the Year three years in a row4
It’s been a super year for changes to Australia’s retirement savings system. Here’s an overview of the main pieces of legislation to be aware of.
The biggest overhaul of superannuation in years came into force on July 1 and, while there was plenty of tinkering, the result should be that more people are winners than losers.
The Australian Securities and Investments Commission’s moneysmart.gov.au service says the changes were designed to make the system fairer and more sustainable.
“But it's now more important than ever to start planning your retirement income early,” ASIC says.1
Apart from July’s super overhaul, there were also proposed moves affecting pensioners, seniors who downsize their homes, and first home savers.
If you want to boost your super with large after-tax contributions, known as non-concessional contributions, you can inject $100,000 a year – down from $180,000 previously. However, you can bring forward three years of contributions if you have a lump sum to deposit. Find out more.
These types of super contributions – known as concessional contributions - are relatively common, often made via salary sacrifice. The old cap of up to $35,000 a year has been cut to $25,000, and that cap includes compulsory super payments made by your employer. Find out more
People who earn more than $250,000 a year (adjusted income)2 will pay a 30% contributions tax on their concessional contributions such as employer payments and salary sacrifice. This is double the 15% contributions tax that most workers pay, and applies to amounts contributed above the $250,000 threshold. Previously this higher tax only applied to people earning more than $300,000. Find out more.
Those earning below $37,000 may qualify for the Low Income Super Tax Offset (LISTO), which effectively is a government contribution of up to $500 to your fund to offset the 15% contributions tax. It is designed to ensure that low income earners don’t pay more tax on their superannuation contributions than on their take-home pay.
The LISTO replaces a similar scheme that offered almost identical benefits.
More workers can now claim a tax deduction for personal contributions they make into their super fund. Previously only self-employed people (those earning less than 10% of their income from employment sources) had this flexibility. The Australian Taxation Office says the aim of the change “is to improve the flexibility of the super system so that more Australians can use their concessional contributions cap”.3 Find out more.
Until July, some wealthy retirees could potentially hold millions of dollars in their tax-free Income accounts. From July 1, the maximum an individual can hold in these pensions without penalty was capped at $1.6 million – still a generous $3.2 million for a couple. Individuals have until the end of December 2017 to remove the excess funds without penalty. Find out more.
Access personalised financial advice
The spouse tax offset of up to $540 for people who pay money into their low-income partner’s super fund has become easier to access. Previously spouses could only earn $13,800 for their partner to be eligible to claim this offset, but from July 1 the threshold jumped to $40,000. Find out more.
The popular transition to retirement pensions that allowed people to enjoy tax-free income while still working have become less generous since July, with the tax on investment earnings in these pensions rising from zero to up to 15% – the same rate as standard super accounts.
Seniors have had to deal with a tougher age pension assets test since January that lowered the value of assets they could hold before losing pension payments. Whilst the government advised that approximately 90% of recipients would be better or no worse off under the new assets test4, approximately 10% of pensioners saw their pensions cut, or abolished. Age pension eligibility details.
From July 1, 2018, people who haven’t used up all of their annual $25,000 concessional contribution caps will be able to make some catch-up payments of their unused portions over a rolling five-year period, if their super balance is less than $500,000. Find out more.
Another Budget incentive – passed by the parliament in December 2017 – allows aspiring home owners to save up to $15,000 a year and $30,000 in total in a superannuation-linked account, to enjoy the same tax benefits as super, and withdraw the money later to help pay for their first home. Read more details here.
In the May Federal Budget, Treasurer Scott Morrison announced a plan to allow seniors who downsize their family home to inject an extra $300,000 each into their super fund, on top of existing caps. The incentive passed the parliament in December 2017 and starts from July 2018. Find out more.
Do I need to do anything now?
As a QSuper member, you have access to tailored financial advice to suit your needs to get all your money working harder for you.5
You might like to find out more about how any legislative changes could impact you.
1 Moneysmart.gov.au guide to July 2017 superannuation changes, accessed 30 November 2017. https://www.moneysmart.gov.au/tools-and-resources/news/superannuation-changes-1-july-2017
2 For the purposes of the contributions tax for high income earners, adjusted income includes taxable income (assessable income less deductions), net investment losses, net investment property losses, total reportable fringe benefit amounts, amounts on which family trust distribution tax has been paid and concessional contributions within the concessional contribution cap.
3 ATO guide to super contribution changes, accessed 25 November 2017. https://www.ato.gov.au/Individuals/Super/Super-changes/Change-to-personal-super-contributions-deductions/
4 Minister for Social Services Scott Morrison, Fairer access to a more sustainable pension, media release, 7 May 2015, accessed 30 November 2017. https://formerministers.dss.gov.au/15866/fairer-access-to-a-more-sustainable-pension/
5 Advice fees may apply.
Queenslanders have more than $3 billion in Australia’s tally of almost $18 billion in lost and unclaimed super, according to the tax office. Find if some of that’s yours.
How to protect what’s important and ensure your super goes to loved ones.
You might make life easier by finding and consolidating your super through Member Online.1
Divorce is not just an emotional upheaval – the impact on your finances can also be substantial. QSuper explains the initial actions to take.