Is Super Still Super?

Generally if you are retired you are supposed to live off your super pension. When you transfer your super to “retirement mode” this is call pension phase. After the 01/07/2017, maximum you can have in pension phase is 1.6million. When the money is in pension phase it is tax free. If you have more than 1.6 million in a pension account, the rest of the balance exceeding 1.6 million will have to be transferred back to your superannuation accumulation account and income taxed at 15c in the dollar. This affects anyone drawing a pension from their super.

This is an example of the government trying to reduce the budget deficit as they want receive more tax. It also reduces your ability to save for retirement especially if you’re not a very good long term saver. Superannuation is hard to access, but if you are limited on the amount you can contribute, it means you will have less to retire on. If you are aged under 65 you can use the bring forward provisions and contribute $300,000 in after tax contributions in a given financial year but will be unable to contribute for the following two years.

These caps used to be $30,000 for under 50 and $35,000 over 50 year olds. Now it is $ 25,000 for everyone but the good news here is you can make up contributions over 5 years (as explained below) and it appears that it will be indexed in $2,500 increments, in line with the Full-Time Average Weekly Ordinary Times Earnings (AWOTE).

If your superannuation account balance (or combined balances if you have more than one super account) is less than $500,000 at the end of a financial year, then you will have the opportunity to utilise the unused portions of your concessional caps from previous years (up to 5 years’ worth) in the following financial year, or future years.

From 1 July 2017, the government will allow all individuals under the age of 75 to claim tax deductions for personal super contributions. This is still subject to the concessional contributions cap, and any contributions made in a financial year. This will assist Australians who aren’t employed, partially self-employed, or those on low incomes.

For those on high incomes, $300,000 and greater are currently taxed an additional 15% on their super earnings. As of the 1^st July 2017 this will reduce to $250,000 income.

This means if you are drawing a pension, still working and aged below 65 earnings within the fund will be taxed at 15% from the 01/07/2017.

An anti-detriment payment is an additional payment made to certain beneficiaries of a deceased member, as part of the death benefit claim. The anti-detriment payment broadly represents a refund of the 15% contributions tax paid while a member of the fund.

This is a positive change. If your other half is a stay-at-home parent, working part-time or currently out of work, adding to their super could benefit you both financially. In the past, your significant other’s salary needed to be below $10,800 to receive this benefit. This income threshold will increase to $37,000 ($40,000 cut off) from 01/07/2017.

If you earn up to $37,000 you may also get a ‘low income super contribution’ of up to $500 from the government. You will get this benefit regardless of whether you add money to your super. The government will automatically make these payments, if you meet the criteria, once your tax return is lodged.