‘Your Future, Your Super’ – what does it mean?

The Your Future, Your Super reforms (YFYS Reforms) were passed in June 2021. The YFYS Reforms aim to make the super system better for members in four key ways:

  • Stapling – preventing the creation of multiple unintended super accounts;
  • YourSuper – empowering members by making it easier to compare products through a new Government comparison website called ‘YourSuper’;
  • Performance test – holding funds to account for product performance through an annual performance test conducted by the Australian Prudential Regulation Authority (APRA);
  • Best Financial Interests – increasing transparency and accountability for how super funds use members’ savings.

Now, let’s explain the YFYS Reforms and what they might mean for you.

Stapling

Stapling has been designed to help prevent the creation of multiple unintended super accounts. It means that a new super account won’t automatically be created every time you start a new job, helping you avoid multiple accounts with fees, insurance arrangements and insurance premiums.

Stapling means that your super follows you. You can start a new job knowing your employer and the Australian Tax Office (ATO) will ensure your super contributions will be paid into your ‘stapled’ account.

Stapling does not impact your ability to change funds at any time.

What stapling means for you

Stapling means you will keep your existing super account if you change jobs, unless you decide to change where your super is invested. This makes it easier for you and removes potential hassles associated with having unintended multiple super funds.

Just as importantly, it means you won’t unintentionally accrue multiple insurance policies and associated insurance premiums (with each super fund you’re in).

YourSuper comparison tool

As part of the YFYS Reforms the Government has launched a comparison website called ‘YourSuper’ to make it easier for members to compare product performance. YourSuper is provided by the ATO and accessible from MyGov. The Government says this tool “is focused on providing members with simple, clear and trusted information about their retirement savings”.

What YourSuper means for you

The YourSuper comparison website went live on 1 July 2021. It has some helpful features – you can access a personalised version via MyGov featuring your super balance and age. Alternatively if you don’t access via MyGov, the generic version will enable you to see how MySuper products have performed based on a nominal $50,000 investment. YourSuper includes information on product performance and fees.

Performance Test

APRA will assess the performance of specified products within the super fund on an annual basis. The assessment is based on comparing a product’s net investment returns (including fees and taxes) with a benchmark return and fees. The results of the annual performance test will be reflected on the YourSuper website from 1 September each year. The results will be expressed as ‘performing’, ‘underperforming’ or ‘not assessed’. For the 2021 year, only MySuper products are subject to the annual performance test, and from 2022 other superannuation products and specified investment options will be included.

What the Performance Test means for you

Whilst performance has always been in focus, super funds are now on notice to ensure they are providing the best value for their members, aiming to protect members from poor outcomes.

Best Financial Interests

The Best Financial Interest requirements are designed to “sharpen the focus” of super trustees, ensuring decisions, such as those on expenses, are in the best financial interests of members. There are also additional requirements for Trustees to make additional information available to members as part of the Annual Member Meeting.

Better informed, more engaged

The YFYS Reforms assist in improving performance and transparency within the super sector.

The Government’s own analysis suggests the YFYS Reforms will have a number of benefits for members. As noted above the YFYS Reforms make it easier for members to engage with their super savings and make better decisions. As always, keeping a close eye on your super – and getting expert advice from someone who understands your unique retirement plans – is invaluable.

If you have questions and would like your financial situation to be evaluated, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article Source: https://www.mlc.com.au/personal/blog/2021/09/your-future-your-super


Are super contributions tax deductible?

Key takeaways

  • There are a whole range of strategies that make it worthwhile putting a little extra effort (and money) into your super
  • Personal super contributions—those made from money you’ve already paid tax on such as savings or your take-home pay—are tax deductible
  • Your personal super contribution is taxed at 15% which is significantly lower than what most people pay on their taxable income.

 

Ever woken up on your birthday and found a horribly-wrapped present at the end of your bed? Plain paper, bulky sticky tape, badly written card? But then you open the present and it’s what you’ve been dreaming of for years?

The same could be said for super. It’s messy, complicated, tricky to get into. But worth it in the end.

Why? Because the three layers of tax benefits—when you contribute, while your money’s invested and when you take it out—could make it supremely effective at giving you a long, worry-free retirement.

Tax-deductible super contributions

One particular tax benefit is tax-deductible contributions to super.

Personal super contributions—those made from money you’ve already paid tax on such as savings or your take-home pay—are tax deductible. These contributions can be claimed against your assessable income when you lodge your tax return.

Bottom line? You get to save some tax whilst bringing you closer to your retirement goals.

The rules on personal tax-deductible super contributions

There are rules surrounding tax in super that you should be aware of.

  • Personal contributions are concessional contributions so, they’re capped at $25,000 per financial year1. If you choose to contribute over this amount, you may be required to pay more tax.
  • Your personal super contribution is taxed at 15%2 which is significantly lower than what most people pay on their taxable income (the highest marginal tax rate is 47% if you include the Medicare Levy).
  • Higher income earners (on more than $250,000) are taxed at 30%3 on contributions. That’s a decent extra tax hit—but still a lot less than the top marginal tax rate.
  • If you’re a lower income earner on a marginal tax rate of 15% or close to it, there may be little advantage in making a tax-deductible super contribution. Speaking to a financial adviser can help you decide the best approach.
  • If you’re 67 or over you need to meet a work test before you can make a personal super contribution. This means you must have been employed during the financial year for at least 40 hours over a period of no more than 30 consecutive days.

Claiming your tax deduction

To claim a tax deduction, you’ll need to provide your super fund with a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form. This form is available through your super fund or the Australia Taxation Office.

Once your super fund receives your form, they’ll be able to confirm the amount you’re eligible to claim as a tax deduction.

Bottom line: Super is harder than it probably should be—but better than you probably think. The mix of a whole range of tax savings, structured long-term investing and regular contributions make it a powerful engine for delivering an anxiety-free retirement.

There are a whole range of strategies—like personal tax-deductible super contributions—that make it worthwhile putting a little extra effort (and money) into your super. Talking to a financial adviser can make it a lot easier.

If you have questions and would like your financial situation to be evaluated, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article Source: https://www.mlc.com.au/personal/blog/2020/08/are_super_contributions_tax_deductible


Key changes to super from 1 July 2021

Key takeaways

  • Compulsory super contributions are legislated to increase from 9.5% to 10% as of 1 July 2021
  • Caps for your own super contributions will also increase, enabling you to add more to super
  • The maximum amount of super that you can transfer into a retirement pension account will increase by $100k.

There are changes affecting super from 1 July 2021 which could impact you.

In this article we outline what those changes are so you can be better prepared.

Compulsory super contributions increasing

Your compulsory super contributions—paid by your employer—are legislated to increase from 9.5% to 10% as of 1 July 2021.

But it won’t stop here.

The rate will continue to increase incrementally by 0.5 percent every year until it reaches 12 percent by 2025.

The intention behind this measure is to see a greater proportion of retirees relying less on the age pension and more on their retirement savings.

Changes to your own super contributions

Currently there is a limit to the amount of super contributions you can make yourself, whether you make these using your take home pay or through your employer.

As of 1 July 2021, this limit is changing so you may be able to add more to your super.

Before tax contributions

The current cap or limit you can contribute to super using your income—before it’s been taxed—is $25,000 a year.

From 1 July 2021, this limit will change to $27,500 a year. You can also add any unused cap amounts that you may have accrued since 1 July 2018 if you’re eligible.

Your own contributions

If you currently make contributions with your own money into super—that is using income after it’s been taxed or from your savings—the current limit you can contribute is $100,000 a year.

From 1 July 2021, this will change to $110,000 a year. If you’re eligible you can also contribute up to three years’ worth of your own contributions ($330,000) under the bring-forward rules.1

1Assumes the person is under the age of 65 at some time during the year when a contribution was made and that the total super balance was less than $1.48m at 30 June 2021.

Increase in super transfer limit for retirement pensions

The maximum amount of super that you can transfer into a retirement pension account will increase by $100k from 1 July 2021.

Currently you can transfer up to $1.6 million from your super into a retirement pension account. This will change to $1.7 million to meet the rising cost of living. It won’t apply to everyone though.

The main benefit of moving your money from a super account into a retirement pension is you don’t pay tax. This is because the earnings you generate from your investments are tax-free.

Note: if you exceed the limit, you will be liable to pay tax on the excess transfer balance earnings.

Who does the change apply to?

How much you’ve already moved into your pension account, if you have one, may affect whether this increased limit applies to you.

The table below highlights the various conditions.

First transfer date* Transfer amount Transfer balance cap from 1 July 2021
On or after 1 July 2021 Up to $1.7 million $1.7 million
Before 1 July 2021 Less than $1.6 million $1.6 million – $1.7 million
Before 1 July 2021 $1.6 million $1.6 million

*Transfer date refers to the day that you first commenced a retirement pension.

Impact on other limits

Other caps and limits, which may apply to you, will also be adjusted on 1 July 2021.

The limit on making your own contribution into super—using your take home pay—will increase from $1.6 million to $1.7 million.

If you have a total super balance of $1.7 million or more, you will not be eligible for the bring-forward arrangements from 1 July 2021.

The limit on whether you are entitled to a government co-contribution will increase to $1.7 million, as will the limit on whether you can claim a tax offset for super contributions you make on behalf of your spouse.

If you have questions and would like your financial situation to be evaluated, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article source: https://www.mlc.com.au/personal/blog/2021/06/key-changes-to-super


The crucial super moves you need to make today

Many women reach mid-life with a significant superannuation shortfall. But it’s not too late to turn things around. Actions now may help set up a more secure retirement.

When was the last time you checked your super balance? The hard fact is that Australian women accumulate, on average, far less super than men over their working lives and retire with smaller balances.

Men aged 55 to 64 had an average balance of $270,710 in 2017-18, while women of the same age averaged $157,050, according to statistics published by the Association of Superannuation Funds of Australia (ASFA) in 2019.1 That’s a difference of 58 per cent and shows that women are far less financially prepared as they approach retirement.

Shockingly, one in three women across all age groups have no super at all. Reasons for this include self-employment, working casually or part-time in jobs where the hours worked aren’t enough to qualify for employer contributions, or having never been in paid employment.

Super-sized setbacks

Beyond having no super at all, there are several reasons why women find themselves well behind men in the balance stakes by the time they reach their forties and fifties. Typically, they’ve taken time out of the workforce to have children, and then chosen to only return part-time while raising them. Women are also more likely than men to become unpaid carers for ageing parents and relatives. During these busy ‘sandwich generation’ years, personal financial planning can take a back seat to more immediate family needs.

And then there’s the gender pay gap – the difference between male and female average earnings. It currently sits at 14 per cent in Australia, according to the Workplace Gender Equality Agency.2

Because of these factors, many women head towards retirement without enough savings to support even a modest lifestyle – particularly if, for whatever reason, their spouse or partner’s super is taken out of the equation.

Making ends meet in your later years

Life doesn’t always go according to plan. Unexpected events like illness, job loss and relationship breakdown may cause significant financial challenges down the track if you don’t take steps now to secure your future. On top of working towards an adequate super balance, this is where having a plan B to provide support – for example, ensuring you are appropriately insured – is important. As is being actively involved in the financial planning decisions in any relationship.

For many Australian women, it is a lesson that comes too late. The number of homeless women aged over 55 has spiked in recent years – up 30 per cent between 2011 and 2016, according to the Australian Human Rights Commission.3 Risk factors for homelessness in later life, according to the Commission, include experiencing economic disadvantage or family or domestic violence, lack of family support, mental health issues, relationship breakdown and the death of a partner.

Many women in these situations have little or no super or savings and live precariously, struggling to cover bills and basic expenses via Centrelink payments and, once eligible, the Age Pension.

Simple steps you can take today

It’s a sobering prospect – but it doesn’t have to be that way. If you’re in the workforce, either full-time, part-time or casually, you can turn things around. Boosting your super savings in the second half of your working life can make a big difference to your final balance and the lifestyle you’ll be able to enjoy when you stop working.

Reviewing your outgoings and assets – including how much is in your super account – will help you understand your position and create a plan to get back on track, says MLC General Manager, Workplace Super, Helen Murdoch.

“Facing into this is so important,” she adds.

“If you’re 50 now, you have another 17 years before you may potentially be eligible for the Age Pension. But it’s not too late to make a big difference during that time. There’s so much you can do.”

Here’s a few things to get started:

  1. Check your investment options. There are a few considerations when deciding if a growth-oriented profile or more conservative profile, is right for you. Take this opportunity to check that your current profile aligns with your long-term goals and you’re still on track. Learn more
  2. Many people have insurance through their super, but is that right for you? If it is, how much cover do you need? Insurance can be very valuable – but make sure your super savings aren’t reduced by the cost of insurance you may not need. Read more
  3. A good way to keep your super in shape is to get closer to your super. Get secure access to your accounts by downloading the MLC app. Get the app

Sorting out a super shortfall

It’s not uncommon for women in their forties and fifties to enjoy a second wind in their careers, as their children achieve independence and start to make fewer demands on their time and the family budget.

If this is you, you may find it’s an ideal time to start making additional voluntary contributions to your super. You can do this in a number of ways. For example, you can ask your employer to make a regular deduction from your salary, or you could make personal contributions from your take-home pay.

Topping up your balance won’t just build your retirement nest egg, either; it could help you to manage tax.

Contributions you make with pre-tax dollars, such as salary sacrifice contributions, are taxed at a maximum of 15 per cent for most people up to the contribution caps.4 (High income earners may have to pay an additional 15 per cent tax on these contributions). You may also be able to claim a tax deduction for personal contributions you make to super. Depending on your income level, this can be a smart way to help manage your tax and maximise the amount you’re saving for retirement.

Looking ahead to a more secure tomorrow

Catching up on your super can seem daunting, but it doesn’t have to be. There’s still time to tackle the issue, and doing so will help provide you with a more comfortable retirement when the time is right for you. And, if you haven’t contributed up to the limit in a previous year, you may be able to make larger contributions now or in the future to give your retirement savings an extra boost.

“It’s okay to feel worried and intimidated, but you can’t let that stop you from stepping up to secure a better future,” Murdoch says.

“Often, women are so used to looking after everybody else, they neglect themselves. But now it’s time to look after yourself and plan for a great future for you.”

We are here to help. Contact Dev Sarker at ds@bluerocke.com today!

 

Source – https://www.mlc.com.au/personal/blog/2020/10/the_crucial_super_moves

1 Better Retirement Outcomes: a snapshot of account balances in Australia, Ross Clare, June 2019, https://www.superannuation.asn.au/
2 https://www.wgea.gov.au/data/fact-sheets/australias-gender-pay-gap-statistics
3 https://www.humanrights.gov.au/our-work/age-discrimination/publications/older-womens-risk-homelessness-background-paper-2019
4 https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/salary-sacrificing-super/


Why super balances fluctuate

Should you worry if your super balance is fluctuating? Or is it a sign that you’ve got the right long-term, growth-oriented approach to your super….

The answer depends on whether your super choices are aligned to your needs.

For many Australian super investors—and there are 16 million1 of us—COVID-19 may have caused your super balance to change overnight.

In this article we’ll address the reasons for this and what it means over the short and long-term.

The COVID-19 crash

Your 2020 super balance has bounced around because COVID-19 has forced lockdowns around the world.

As the world’s economy largely depends on people getting together – in shopping centres, offices, stadiums, bars and airports—countries grounded to a halt.  As the crisis began to unfold in Wuhan, Lombardy, London, New York and Auckland – share prices tumbled too.

Impact depends on how your money’s invested

In 2020 super balances haven’t just fluctuated downwards. As Governments and central banks flung masses of cash at the problem (and a clearer picture of the virus’ weaknesses emerged), share prices soared back up. The US and German markets both had an increase of over 20% in the June quarter.

So, what do all these numbers tell us about the nature of your super balance?

Growth fund

It will fluctuate. And it will fluctuate in proportion to the percentage of growth assets in your super fund options. If you’re in a Growth2 fund where perhaps 85% of your money is in shares and property, short-term falls in the sharemarket will be reflected in your super balance.

Balanced fund

The same is true—but to a lesser extent—if you’re in a balanced fund where you could have up to 70% of your money invested in shares and property.

Conservative

If you’re in Conservative or Cash options, your balance won’t move so much with the market as most of your capital is invested in low-return, low-risk options like cash and short-term government securities.

Higher returns mean more movement

The crucial point is that this movement—the volatility—is the price you pay for higher returns.

In fact, over 10 years, the average person invested in a Growth super fund outperformed those invested in a Conservative super fund by more than 2% per year3.

That may not sound much, but super is a long-term investment and two percent extra a year, compounding over decades, can make a serious difference to the amount of money you retire on.

Determining your comfort level with volatility

Every person’s super plan is different.

If you’ve got a long time till retirement and you can look past short-term changes in your super balance, you may find that taking a more aggressive approach with your investment options is ok. This means your portfolio would have greater exposure to higher risk assets like shares and property than those with lower risk, cash and fixed income.

As you get closer to retirement, or if your super is all you have to rely on in retirement, a more stable super balance could be desirable so more conservative investment options may suit you.

Take control of your super

The best thing you can do is review your investment options and make sure they’re tuned to suit your age, attitude to risk, current financial circumstances and long-term plans. Speaking with a financial adviser might make that review even more effective.

At BlueRocke, our goal is to make you wealthier than you can be on your own. With appropriate advices, you may have a potentially improved financial position over time. Contact Dev Sarker at 1300 717 136 today!

 

1 ASFA: The benefits of Australia’s compulsory superannuation system – June 2020
2 We’re using categories from Moneysmart.gov.au. The exact numbers may differ slightly depending on the investment manager you’re with. The principles remain the same.
3 Chant West: Super funds navigate crisis to deliver surprise result – 17 July 2020

 

Source: https://www.mlc.com.au/personal/blog/2020/09/why_super_balances_fluctuate


Four tips to get your super back on track

Like many Australians, you may have dipped into your super early as part of the government’s Coronavirus financial hardship scheme. While the extra funds can come in handy right now, it’s important to keep sight of the bigger picture.

If you lost your job or had your hours reduced due to the impact of the Coronavirus, you may have taken advantage of the government’s early release of super scheme and dipped into your super to help with your living expenses.

Once you’re in a more comfortable financial position, it may be time to think about how you will rebuild your super balance to minimise the long-term impact on your retirement savings. This is especially important when you’re young because of the power of compounding returns over time. You can use the government’s moneysmart super withdrawal estimator to see how much of an impact the withdrawal may have on your retirement, so you can work out how much you need to rebuild.

Here are four simple suggestions for how to get your super back on track again.

1. PUT ANY SPARE MONEY BACK IN YOUR SUPER

If you didn’t need to use all the money you withdrew from your super, you can add it back to your super account as a one-off contribution. As well as boosting your balance, this might allow you to reduce your income tax (if you’re eligible to claim your contribution as a tax deduction).

Keep in mind, however, that the ATO is imposing penalties for anyone they determine has taken money out of super and then recontributed it for the sole purpose of obtaining a tax deduction. You can read more about it on the ATO website.

2. ADD A LITTLE BIT EXTRA TO YOUR SUPER EACH PAY DAY

If you’re back at work now and earning a wage, check whether your employer supports salary sacrificing. This is using part of your before-tax salary to contribute to your super, on top of the 9.5% Super Guarantee contributions your employer already makes for you. It will also reduce your taxable income, which means you could potentially pay less income tax.

Regularly putting in extra money to top up your super can make a big difference to your balance over time. For example, this chart shows the difference contributing a small amount each pay could potentially make to your super balance at retirement.1

Salary sacrifice per week Super balance at age 65 Difference
$0 $168,605
$10 $180,260 $11,655
$20 $191,915 $23,309
$30 $203,569 $34,964

 

1. Assumptions: This example assumes an initial super balance of $0, a salary of $65,000 p.a. and a weekly salary sacrifice of $10, $20 or $30 per week over 25 years. Current age is 40, and retirement age is 65 years old. Results are in today’s dollars, adjusted for annual inflation of 3% CPI and 3% of rising community living standards. The balanced investment option assumes an investment return of 3.46% p.a. after fees and tax. Source: CFS First Tech Team.

3. PUT A LUMP SUM TO GOOD USE

If you’re lucky enough to come across a lump sum, it could make sense to put all or some of this money into your super. For example:

  • a redundancy payout
  • a tax refund
  • an inheritance
  • the proceeds from a sale, such as a car or your house.

Just remember that there are limits around how much you can contribute to super each year. Currently, you can make up to $25,000 in before-tax (concessional) contributions and $100,000 in after-tax (non-concessional) contributions each financial year.2 If you go over these caps, you may have to pay additional tax.

4. CHECK YOUR INVESTMENT STRATEGY

How your super is invested may make a difference to how long it takes your balance to recover. Typically, growth assets like property and shares have higher returns than defensive assets like cash and fixed interest. Most investment options in super funds have a mix of both growth and defensive assets.

Check your latest statement, log on to FirstNet or download the Colonial First State app to see if your investment strategy is appropriate for you. If you’re not sure, get in touch with a financial adviser. Contact Dev Sarker at 1300 717 136 today!

Source: colonialfirststate.com.au