How to give clients’ super balances a post-election boost
Following on from a tumultuous federal election, voters have determined that the Coalition will remain in power. For Australians, changes to financial regulation that have been proposed may, if enacted, affect their current investment, taxation, pension or retirement savings status.
Although daily headlines about tax, super, pension and finance issues can seem overwhelming, they also represent an opportunity to get the information and advice you need to make smart decisions now that will pay off later.
The long and short of it is, being aware now means you can plan for upcoming changes or take advantage of existing rules before new ones might take their place.
CRUNCH THE NUMBERS
A great place to start – always – is with the hard numbers. There’s no better way to bring your super to life than seeing what impact, in dollar terms, your choices today will have when you really need it. Your options are likely to be different depending on whether you’ve just started out or you’re counting down to retirement; what’s important to understand is that you do have options to influence what your glory days in retirement look like.
So, step one is to use online calculators to work out how you’re tracking and the kind of retirement lifestyle you can expect from your current projected super levels. If you think there’s room for improvement (and for most of us, there is) then below are some suggestions to give your super a boost right now.
WHAT YOU CAN DO RIGHT NOW
Super is all about contributions: who makes them, how much and where they come from. As matters stand, you can boost your super simply by knowing the different kinds of contributions you’re eligible to make and receive – and choosing what works for you right now.
Personal lump sum contributions with a tax deduction
If you have access to a lump sum (that is, funds not earned from wages or salary) then you might consider putting it into your super right now. Not only will this boost your balance, but you may be able to claim a tax deduction, so long as the lump sum contribution keeps you below the concessional (or pre-tax) contributions cap of $25,000.
The option of claiming a tax deduction for contributions from non-wage or salary earnings has only been available since 1 July 2017. Previously, at least a portion of funds going into super had to be from your wage or salary.
AFTER-TAX CONTRIBUTIONS
If retirement is closing in, taking some advice on how to fast track your balance via non-concessional (or after tax) contributions might give you a super boost. The current rules allow you to make a contribution of $100,000 per year if you’re aged between 65 and 74. There are quite a number of conditions attached to this kind of contribution, so it’s best to seek advice on your own situation to make sure you don’t end up with an unexpected tax bill.
If you’re not in a position to make lump sum contributions, there’s good news. You can still charge up your super by taking advantage of several other contribution types – irrespective of the recent election outcome.
EMPLOYER CONTRIBUTIONS
If you’re some way from retirement, asking your employer to make additional contributions to your super from your before-tax earnings is a great way to power up for the future. These employer contributions are also known as salary sacrifices.
Over time, even small additional amounts can make a major difference and, because they come from your pre-tax earnings, you get great value for your dollar. Currently, the total of your combined employer and salary sacrificed contributions must not be more than $25,000 each year.
GOVERNMENT CO-CONTRIBUTION
If, as at 2018/19 you earn less than $52,697, and you make additional after-tax payments into your super, the government can contribute up to $500 to your super account. Both single one-off payments and regular additional payments can attract a co-contribution. How much the government will contribute depends on a range of factors, including your total after-tax contributions and your total wage or salary. There are also eligibility criteria.
SPOUSE CONTRIBUTIONS
You can also either give or receive a super boost for your spouse or partner for a potential super win-win. If you’re a spouse who earns below $37,000 a year and your partner has higher earnings, he or she could receive a tax offset of up to $540 if they make a contribution of $3,000 to your super. The tax offset reduces with lower contributions and higher earnings of the receiving spouse, cutting out at $40,000 per year.
INSURANCE MATTERS
Finally, from 1 July, if there have been no contributions made to your super account for 16 months or more (known as an ‘inactive account’), the default (or automatic) levels of life and, in some cases, other forms of insurance that form part of your super will be ‘turned off’.
Having insurance that’s appropriate for your age and life circumstances is one of the cornerstones of financial security, so it’s a good idea to check whether your cover will be cancelled, understand what the implications are and, if you need to, seek continued cover or cover from elsewhere. Once again, taking professional advice can help you come to the right decision for you and your circumstances.
When all is said and done, we don’t have a crystal ball. We don’t know which, if any, of a number of proposed changes will take effect. What we do know, however, is that by staying informed you can act right now to give your finances a post-election boost.
Laura Wright is the chief executive of NGS Super.
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