Tag Archives: Superannuation

It’s time to close the gender superannuation gap.

By Robert Wright /April 05,2019/

In an ideal world, we’d retire from work when we felt like it, free to travel the world, take up a new interest or just relax. But, many women don’t have that luxury. They are living longer than men but retire with 37% less superannuation. And for vast numbers that could mean restricted choices about how they live their retirement. 40% of single women live in poverty and among married women, 44% rely on their partner’s income.

This gender super gap is caused by a number of reasons.

Women working full-time earn 18% less than men.
Women are more likely to work part-time and they generally take time out of the workforce to raise a family or look after elderly parents.
They’re not planning ahead with super contributions if they want to start a business, travel, study or take a gap year.

In 2018, women in full-time work took home an average $25,717 a year less than men. While raising their children, women often return back to part-time work: 45% of women work part-time compared with 19% of men.

HOW TO ACHIEVE #BALANCEFORBETTER?

Short of major changes in the world of work and superannuation policy, the way to achieve a better super balance comes down to you. Rest assured, there’s a number of ways to do it. First of all, “get educated”, says Nikki Brown, Vice Chair of Women in Super.

It’s advice that applies to any age. If your knowledge about financial matters is limited to checking your superannuation statement or balance on your app, learning how to drive your super more effectively doesn’t have to be a stretch. Your superannuation fund’s website will provide lots of information. You can also visit an independent site such as the Australian Securities and Investment Commission’s MoneySmart for easy-to-understand information about how super works and the options available to you.

If that’s not your thing, the next step may be to talk to a financial adviser who can assess your financial position, discuss your plans for the future and lay out some possibilities that might suit your situation.

For young women just starting out in their careers, retirement is hardly a pressing concern, but making your money stretch further can be. This is a great opportunity to make one of the biggest changes to your financial fortune later in life.

START THINKING ABOUT THE FUTURE NOW

The best thing you can do is to start early in building your retirement income. A little bit extra towards your super now could grow to a bigger amount later on.

Don’t think that it’s too late once you hit your 40s to make a difference to your super balance. Sure, you may have stopped work for a period to have a family and you may now be working part-time. Or you may be divorced and struggling to make the rent or mortgage payments, let alone super contributions.

But, at this age, and later in your 50s and 60s, the friends of your future financial stability are continued employment (while you’re working, you can contribute to super); having a budget (live within your means); getting good financial advice (understand it yourself or talk to an expert).

If you want to know how you can better manage your super and build it as an income stream for your retirement, you can talk to you super fund or seek advice from a financial adviser.

Source: Colonial First State, March 2019

Federal Budget 2019: What it means for you

By Robert Wright /April 03,2019/

The Federal Treasurer, the Hon. Josh Frydenberg MP, delivered the 2019 Federal Budget on 2 April 2019.

As widely predicted, the announcement included a range of tax cuts for both individuals and businesses. The Treasurer also announced increased funding for regulators to encourage tax and superannuation compliance, a number of positive changes to superannuation, and an affirmation of previously announced aged care measures.

This summary provides coverage of the key issues of most interest to you.

Highlights

Personal income tax

Increases in the low and middle income tax offset to apply in 2018-19.
Other tax benefits (tax rates/thresholds and low income tax offset changes) to commence in 2022-23 and later income years.

Business owners

Extension of the provision allowing small business to instantly write-off asset purchases.
Further consultation on Division 7A reform.

Superannuation

Work Test changes.
Spouse contributions.
Bring-forward of the NCC cap.
Tax relief for merging superannuation funds.
ECPI administration simplification.

Social Security

Energy Assistance Payment.

Aged care

Improving the quality, safety and accessibility of aged care services.

Personal income tax

The Government will lower taxes for individuals by building on its legislated Personal Income Tax Plan, announced in the 2018 Federal Budget. The changes to the plan will provide immediate relief to low and middle income earners, support consumption growth and ease cost of living pressures.

Low and Middle Income Tax Offset from 1 July 2018

The Government will provide a further reduction in tax provided through the non-refundable low and middle income tax offset (LAMITO).

LAMITO for 2018-19 and 3 subsequent income years

This measure increases the effective tax-free thresholds as follows:

Increase in tax bracket thresholds from 1 July 2022

From 1 July 2022, the Government will increase the top threshold of the 19 per cent personal income tax bracket from $41,000, as legislated under the plan, to $45,000.

Low Income Tax Offset from 1 July 2022

From 1 July 2022, the Low Income Tax Offset (LITO) will be increased to a maximum $700 for those with taxable income less than $37,500. LITO will phase out at 5% in the income range from $37,500 to $45,000, and at 1.5% thereafter.

Reduced marginal tax rate from 1 July 2024

From 1 July 2024/25, the Government will reduce the 32.5 per cent marginal tax rate to 30 per cent. This will more closely align the middle tax bracket of the personal income tax system with corporate tax rates, improving incentives for working Australians. In 2024/25 an entire tax bracket, the 37 per cent tax bracket will be abolished under the Government’s already legislated plan. With these changes, by 2024/25 around 94 per cent of Australian taxpayers are projected to face a marginal tax rate of 30 per cent or less.

Medicare levy thresholds for 2018/19

The threshold for singles will be increased from $21,980 to $22,398. The family threshold will be increased from $37,089 to $37,794. For single seniors and pensioners, the threshold will be increased from $34,758 to $35,418. The family threshold for seniors and pensioners will be increased from $48,385 to $49,304. For each dependent child or student, the family income thresholds increase by a further $3,471, instead of the previous amount of $3,406.

On-time payment of tax and superannuation liabilities

The Government will provide $42.1 million over four years to the ATO to increase activities to recover unpaid tax and superannuation liabilities. These activities will focus on larger businesses and high wealth individuals to ensure on-time payment of their tax and superannuation liabilities. The measure will not extend to small businesses.

Business owners

Increasing and expanding access to the instant asset write-off

From 7:30 PM (AEDT) on 2 April 2019 (Budget night), the Government is increasing and expanding access to the instant asset write-off.

The Government is increasing the instant asset write-off threshold from $25,000 to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets.

Medium sized businesses will now also have access to the instant asset write-off.

The increased and expanded instant asset write-off will apply from Budget night until 30 June 2020.

Arrangements prior to Budget night

The Government has already legislated a $20,000 instant asset write-off for small businesses. Eligible small businesses can already immediately deduct purchases of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2019.

On 29 January 2019, the Government announced that it would increase the instant asset write-off threshold for small businesses from $20,000 to $25,000 and extend the instant asset write-off for an additional 12 months to 30 June 2020.

These changes interact with the changes being announced as part of Budget. This means that, when legislated, small businesses will be able to immediately deduct purchases of eligible assets costing less than $25,000 that are first used or installed ready for use over the period from 29 January 2019 until Budget night.

Further consultation on amendments to Division 7A

The Government will defer the start date of the 2018-19 Budget measure, Tax Integrity – clarifying the operation of the Division 7A integrity rule, from 1 July 2019 to 1 July 2020. Division 7a is part of the Income Tax Assessment Act 1936, and aims to prevent profits or assets being provided to shareholders or their associates tax free. The 2018/19 Budget measure was intended to address unpaid present entitlements. Delaying the start date by 12 months will allow additional time to further consult with stakeholders on these issues and to refine the Government’s implementation approach, including to ensure appropriate transitional arrangements so taxpayers are not unfairly prejudiced.

Superannuation

Work test changes

From 1 July 2020, Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the Work Test.

Currently the Work Test (a minimum of 40 hours worked over a 30 consecutive day period in the financial year of contribution) applies from a superannuation fund member’s 65th birthday.

This change will align the superannuation Work Test with the eligibility age for the Age Pension, which is scheduled to reach age 67 from 1 July 2023.

Spouse contribution age limit

The maximum age at which a spouse contribution can be made will be increased from age 69 to age 74. The limit applies to the age of the spouse into whose superannuation account the spouse contribution is being made.

Currently those aged 70 and over cannot receive contributions made by another person, including a spouse, on their behalf.

This measure was announced in conjunction with the Work Test changes outlined above.

NCC bring-forward arrangements

The cut-off age for the bring-forward of up to two future years of the non-concessional contribution (NCC) will be extended by two years. This means NCCs of up to $300,000 can be made in one financial year.

Currently the bring-forward arrangement applies until 30 June in the financial year the superannuation fund member turns age 65. This will be extended to allow those aged 65 and 66 to use the bring-forward arrangement.

This measure was announced in conjunction with the Work Test changes outlined above.

Permanent tax relief for merging superannuation funds

The Government will make permanent the current tax relief for merging superannuation funds that is due to expire on 1 July 2020.

Since December 2008, tax relief has been available for superannuation funds to transfer revenue and capital losses to a new merged fund, and to defer taxation consequences on gains and losses from revenue and capital assets.

The tax relief will be made permanent from 1 July 2020, ensuring superannuation fund member balances are not affected by tax when funds merge. It will remove tax as an impediment to mergers and facilitate industry consolidation. Consolidation would help address inefficiencies by reducing costs, managing risks and increasing scale, leading to improved retirement outcomes for members.

ECPI calculations

The Government will reduce costs and simplify reporting for superannuation funds by streamlining some administrative requirements for the calculation of exempt current pension income (ECPI).

The Government will allow superannuation fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating ECPI.

The Government will also remove a redundant requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method, where all members of the fund are fully in the retirement phase for all of the income year.

This measure will start on 1 July 2020.

Social security

Energy Assistance Payment

The Government will provide $284.4 million over two years from 2018-19 to make a one-off Energy Assistance Payment of $75 for singles and $62.50 for each member of a couple eligible for qualifying payments on 2 April 2019 and who are resident in Australia.

Qualifying payments are the Age Pension, Carer Payment, Disability Support Pension, Parenting Payment Single, the Veterans’ Service Pension and the Veterans’ Income Support Supplement, Veterans’ disability payments, War Widow(er)s Pension, and permanent impairment payments under the Military Rehabilitation and Compensation Act 2004 (including dependent partners) and the Safety, Rehabilitation and Compensation Act 1988.

This measure builds on the 2017-18 Budget measure titled Energy Assistance Payment.

Aged care

Improving the quality, safety and accessibility of aged care services

The Government affirmed its announcement on 10 February 2019 issued by the Prime Minister, Minister for Health and Minister for Senior Australians and Aged Care to provide $724.8 million over five years from 2018-19 to support older Australians through further improvements to the quality, safety and accessibility of residential and home care services.

Source: Macquarie April 2019

FOUR TIPS FOR WOMEN TO TAKE CONTROL OF THEIR SUPER

By Robert Wright /March 22,2019/

Faced with average lower earnings, possible time out from the workforce to raise children, and longer life expectancy, it can be a struggle for women to save enough money in their super. According to the 2017 HILDA survey, Australian women are retiring with an average superannuation balance of $230,907 while men are retiring with about twice this amount.

But if you’re a woman earning an income, it’s never too late to play catch up. Looking at your super and taking action now could make a difference over time to how much savings you have in super for retirement.

1. Get to know your super better – it’s your money
Superannuation, or ‘super’, is money set aside while you are working so that when you stop working it will provide you with an income in retirement. If you are an employee, your employer should be making super contributions to a superannuation fund on your behalf. These payments, known as super guarantee contributions or concessional (before-tax) contributions, will be equivalent to 9.5 per cent of your salary or wages.

If you are self-employed, you will need to pay yourself super to provide for your retirement. You can make regular contributions or make lump sums less frequently, to suit your cash flow. To get to know your super better, start by checking your balance regularly, along with the insurance and investment options you have to make sure they are the best fit for your circumstances.

The Australian Taxation Office (ATO) recommends that you check your employer is paying the correct amount of super on your behalf. If you are unsure how much your employer should be paying you can use the ATO’s Estimate my super tool. If your employer is not paying the correct amount you can report this to the ATO online.

Many super funds arrange life and disability cover for their members, for a fee. Having insurance can provide a good sense of security for you and your family. It’s important that you know what cover you have as you might have similar cover under another type of policy. This might mean you are paying for the same cover twice, however you will not be able to claim twice.

2. Consolidate your super and save on fees
It’s a good idea to make sure all your super is in the same place. If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about. If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.

3. Contribute more and watch your super savings grow

Want to see your super grow faster? You can make payments into your super fund account in addition to the Super Guarantee 9.5 per cent that your employer pays on your behalf. This could really boost your super over time, and can help you make up for periods when you are not working. Even small amounts could make a difference.

The different types of additional contributions that can be made to your super fund are:

Concessional (before-tax) super contributions – these are super contributions you make before you pay tax on them.
Non-concessional (after-tax) super contributions – these are super contributions you make from sources that have already been taxed.

Be aware that the Federal Government applies monetary caps to these contributions to limit the tax concessions associated with making super contributions. Some types of contributions if made in excess of these caps are subject to tax rates of up to 49 per cent.

4. Don’t forget your TFN, otherwise you may pay more tax
To confirm if your super fund has your tax file number (TFN), take a look at your super statement. If your TFN is not listed, contact your fund and give it to them.

The benefits of providing your fund with your TFN are:

Your fund will pay less tax on employer contributions (and pass the savings on to you)
Concessional contributions are generally only taxed at 15 per cent, which means you could lower your taxable income
You are less likely to lose track of a super account
You will not miss out on government super payments – for example, the government co-contribution if applicable
You will be able to make personal (after-tax) contributions to the fund.

Source: Colonial First State, 20 December 2018

Super investment options- what’s right for you?

By Robert Wright /March 22,2019/

Choosing the right super investment options at the right time could make a difference to how much money you have when you retire.

When it comes to your superannuation, the investment options you choose today and in future may impact how much money you retire with.

If you haven’t selected an investment option within your super, you’re probably invested in your fund’s default option, which will generally take a balanced approach to risk and return.

To get you up to speed, we’ve answered some commonly asked questions around how your money is invested, the different options available and how your preferences can affect your investment returns at any age.

What do super funds do with my money?

Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%. Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.

Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.

If you haven’t selected an investment option, your super fund will usually put you into a default option, which generally means your exposure to risk and return is somewhere in the middle.

If you’re not sure what options you’re invested in, contact your super provider.

What are the super investment options I can choose from?

Most super funds let you choose from a range, or mix of investment options and asset classes. These might include ‘growth’, ‘balanced’, ‘conservative’ and ‘cash’ but the terms can differ across super funds.

Here’s a small sample of the typical type of investment options available:

Growth options aim for higher returns over the long term, however losses can also be notable when markets aren’t performing. They typically invest around 85% in shares or property.
Balanced options don’t tend to perform as well as growth options over the long term, but the loss is also less when there are market downturns. They typically invest around 70% in shares or property, with the rest in fixed interest and cash.
Conservative options generally aim to reduce the risk of market volatility and therefore may generate lower returns. They typically invest around 30% in shares and property, with the rest in fixed interest and cash.
Cash options aim to generate stable returns to safeguard the money you’ve accumulated. They typically invest 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions.

What’s the right investment option for me?

Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.

For instance, if you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.

If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.

While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.

Source: AMP News & Insights