AFTER a year during which we had the Brexit and the election of Donald Trump, it may be difficult to recall that the 2016 Federal Budget introduced a raft of changes to superannuation which will affect thousands of Australian households from July 1.
While, politically, these changes were sold as being targeted at the rich, they potentially impact almost anyone currently contributing to or drawing from a superannuation account, such as those working and retired. Therefore, if you are in this category, it is important that you meet with your financial adviser before June 30, to consider how the changes affect you.
In summary, the changes impact:
- Pre-tax (concessional) contributions and salary sacrificing,
- After-tax (non-concessional) contributions,
- Transition to retirement strategies,
- Pension accounts,
- Death benefits and
- Defined benefit schemes.
For example, if you are considering selling an asset in the near future, the changes to the after-tax contributions rules may impact the timing of that decision and the use of the proceeds.
It is hard enough as a professional financial adviser to keep on top of the seemingly endless tinkering the government does with our superannuation system. How hard-working Australians are expected to keep up to speed is beyond me. This indeed is part of super's PR problem, in my view: People feel that super is not within their control and the apparent complexity and ever-changing rules create uncertainty and a disincentive for people to invest in their super.
The name itself puts people off. What on Earth does "superannuation" mean anyway? It sounds like a word made up by tax boffins. Why not simply call it your "retirement savings" or "personal pension" account? It turns out that "superannuation" is derived from "superannuate" - a 17th century term meaning to "render obsolete" by old age. Hardly inspiring!
Nevertheless, for most people maximising contributions to super throughout their working life, whether by salary sacrificing or even after-tax non-concessional contributions, remains the most tax effective means of generating wealth. So don't let the name or the rule changes put you off. Take advice from a qualified financial adviser before June 30 on the technicalities and get as much into super as you can afford.
For more details email firstname.lastname@example.org. This information is general in nature and readers should seek professional advice specific to their circumstances.