Your super and the 2016 Federal Budget
There has been plenty of media coverage in recent months regarding anticipated changes to superannuation and related tax treatments as part of the Federal Budget for 2016, recently brought forward to be announced on May 3.
While there have been calls for super to be ‘off the table’ when it comes to addressing budget issues, the reality has been that the $2 trillion (and quickly growing) industry has proven too tempting for successive governments to resist.
The Federal Treasurer, Scott Morrison has confirmed in public speeches that the May Budget will contain key changes to super tax concessions, to reflect the government’s view of the purpose of superannuation being to provide incomes in retirement to substitute or supplement the Age Pension and not as an estate planning or tax minimisation device.
With a potential tightening of contribution caps (how much money individuals can pour into super), increasing age limits, and more restrictive rules around accessing super savings in retirement - now may be the right time to review your super arrangements, before any new rules come into effect.
While we can only speculate on the exact changes the government will introduce, it appears clear that the intent will be to make it harder to transfer large amounts of money into super, and more difficult to access it until later in life.
While there may not necessarily be any need to make significant changes to your current approach just because of possible changes within a Budget, we always encourage our members to take control of their super savings and determine whether they are taking advantage of all options and benefits currently available to them.
Items to consider and potentially action prior to May 3 include:
• Transition to retirement and pension arrangements
Current rules allow for people reaching their ‘preservation age’, currently 56, to access their super savings even if they are still working. Known as a ‘transition to retirement’ pension, money can be tax effectively put back into their super pot via salary sacrifice to grow their savings even further.
Possible changes may limit the ability to start a new transition to retirement pension and could be dependent on rules based on contribution amounts and the number of hours worked per week. For those already aged 56 and older, it may be worthwhile looking into this arrangement prior to budget night.
• Maximising your contributions
There are existing limits to the amount of money you can add to your super (including the mandatory contributions from your employer) depending on your age. These limits have already been changed several times over the last decade, and there continues to be calls to limit tax benefits to high income earners.
With a possible tightening of those contribution caps, and a limit on the amount of super that is taxed at the favourable rate of 15%, it is important to understand what amount you are able to (and can afford to) contribute to super and whether there is any benefit in increasing that amount.
The key message though is getting advice. Super can be very complicated and the rules and benefits apply differently depending on your individual circumstances, so seeking assistance from a qualified financial adviser is a smart move – and moving quickly, prior to the 2016 Budget may help your retirement nest egg to be as big and healthy as possible.
This article was prepared by the team at NSF Super, located in Charlestown. Call the team on 1800 025 241 or email email@example.com if you would like any more information.
This article contains general information only and has been prepared without taking into account your financial objectives, situation or needs. It may, therefore, not be right for you. Before you make any investment decision, we suggest you consult the relevant Product Disclosure Statement and/or seek licensed financial advice.