On 29 May 2020, the Government made regulations which increase the age at which contributions can be made:
without meeting the work test, and
on behalf of a spouse.
The measures are effective from 1 July 2020.
It is important to note that legislation will need to be passed by Parliament for the proposed changes to the eligibility age for the bring-forward rule for this to become law. This Bill proposes to allow individuals under aged 67 on the prior 1 July to trigger the bring-forward rule. Currently, this is only available to those aged under 65. It is proposed to commence from 1 July 2020.
The work test will no longer need to be met to make voluntary contributions to superannuation from 1 July 2020 for those aged 65 and 66. This means the work test requirements will align with Age Pension age which will be 67 from 1 July 2023.
The removal of the work test provides the opportunity for eligible clients to:
make non-concessional contributions
make concessional contributions including catch-up contributions
implement the recontribution strategy
manage tax, including capital gains tax
claim the spouse contribution tax offset or co-contributions (if eligible)
make contributions under the small business CGT concessions, and
transfer foreign superannuation into an Australian superannuation account.
The age limit for spouse contributions will increase to 74. Currently, spouse contributions can only be made if the receiving spouse is under age 70. Additional flexibility will be provided by the removal of the work test for those aged 65 and 66.
This would enable spouse contributions to be made for the receiving spouse without the need to satisfy the work test up to age 67. From age 67 to 74, the work test would need to be satisfied by the receiving spouse.
Making spouse contributions is a simple strategy that enables that spouse’s superannuation to be boosted. This may be used as a means of equalising the superannuation interests of both members of the couple. It may also entitle the contributing spouse access to the spouse contribution tax offset.
There is no change to other criteria, such as the total superannuation balance, which will limit the ability to make non-concessional contributions.
Speak to financial adviser, Dev Sarker at 1300 717 136 today.
Source: MLC News and Updates, article published on: 01-06-2020
We’re here to help you understand what happens in a share market downturn,
If you’ve seen a decrease to your super balance as a result of the coronavirus, it’s understandably cause for concern.
When your balance goes down (or up), it’s as a result of changes in the value of investments in your super fund — this could be a mix of cash, shares, fixed income, property, and more—and, of course, your balance will change when you or your employer adds money each month, or when you withdraw money in retirement or through insurance premiums, fees and taxes.
Severe as they can feel, events like this aren’t permanent. In fact, based on history, markets have bounced back from other global shocks including epidemics like SARS and Swine Flu.
In this article, we’ll address five key areas to consider when it comes to thinking about your super in a market downturn and when there’s increased volatility.
1. Maintain a long-term perspective
Super is like any type of investment, there will be times of highs and lows. For the majority of Australians, super may be our longest-term investment given we start investing in super when we get our first job and don’t access the money until retirement.
It’s also the nature of investment markets to change rapidly, particularly shares, property or fixed income investments. The share market for example, is a public market so when the share market rises or falls, changes in share prices may impact the value of your super if it’s invested in shares.
Markets recover with time
But from what we’ve seen in the past with events that disrupt investment markets, markets do eventually recover, it just takes time.
From the 1987 Stock Market Crash to the bursting of the Tech Bubble in 2000, each trigger is different and the time it takes to recover varies too — it can take months, weeks or even years. While disruptions to markets occur fairly regularly, they are impossible to accurately predict.
So, if you do decide to make changes to your investments during falling markets—like switching to a different type of portfolio—it’s important to also consider what impact that will have on your returns when markets recover.
The value of $10,000 invested for 70 years
The dollar value 70 years later is shown at the end of the graph (at 31 December 2019) with the average annual return in brackets.
2. Review your investment strategy
While these events may make you want to take action, it’s important to take a moment to consider your investment strategy including why you invested that way in the first place.
Understanding the investments that make up your strategy and how they are expected to perform over long periods of time, can help you think about your strategy objectively, instead of reactively. Particularly short-term market volatility which can influence your investment decisions.
If your strategy is intended to be a long-term plan, which may be the case for those with a long way to go before they retire, making decisions based on short-term market fluctuations may greatly affect whether you achieve your long-term goals.
If you’re approaching or are in retirement, it’s still important to stay focused on your investment strategy. Carefully consider all of your options, and their impact on your retirement goals, before making any significant changes. Speaking to a financial adviser may help with this.
3. Be aware of your risk tolerance
It’s always important to consider how you feel about risk and market volatility.
By understanding your risk tolerance, you’ll be better able to make decisions about the structure of your investment portfolio in a way that aligns to you personally. Risk tolerance depends on how you feel about taking risk and your ability to do so, such as whether you are financially able to bear the risk.
Asset classes like shares and property, have higher return potential and experience greater fluctuations in value, than cash or fixed income investments. How much exposure you choose to have in each of these asset classes, may change depending on your level of comfort, especially during periods of investment market instability.
4. Consider diversification
One of the most effective ways of reducing the impacts of investment fluctuations is to diversify. Multi-asset or diversified funds invest across multiple asset classes to assist in reducing volatility.
Diversification essentially follows the concept of not putting all your eggs in one basket by spreading your money across many asset classes, countries, industries, companies, and even investment managers.
When one area of your portfolio is weak and falling, another may be rising strongly. If you have money invested across many areas, changes in their values tend to balance each other out.
Diversification doesn’t mean you can avoid negative returns altogether, but it helps reduce the size and frequency of fluctuations in your portfolio. Particularly compared to if you’d only invested in shares, for instance.
5. Seek support from a professional
Super funds have lots of information available online to help you understand your savings.
Working with a financial adviser can help you design a plan to achieve your financial goals. They may also provide you with a better understanding about the risks and rewards of investing and how you can manage risk.
While the impact of market volatility can affect your super, it’s important to remember it won’t last forever. The investment strategy you adopt should take into account factors including—your financial goals and the savings required to get there, the number of years you have to invest, the return you can expect from your investments, and how comfortable you are with volatility.
We are help to help. Contact Dev Sarker at 1300 717 136 today.
Important Update – The Government’s new super and pension provisions announced 22 March
Over the weekend, the Australian Government announced its economic support package to help Australians who are under financial stress as a result of the Coronavirus.
Two of the support measures announced include the early release of superannuation for those financially affected by the Coronavirus and a temporary reduction of minimum pension payment requirements for retirees.
A summary of these measures, including information about who is eligible and how individuals can access these provisions can be found in this link – https://www.mlc.com.au/personal/corona-virus/government-superannuation-changes
If you need more information, we are happy to help. Contact Dev Sarker today at 1300 717 136.
Did you know there is over 10 million Australians with a superannuation account, approximately 36% of which hold more super accounts, which make up $20.8 billion in ‘lost super’. Is some of that yours?
Moved house? Changed jobs? Don’t know where your teenage self stashed your super? It’s easy to track it down.
Consider Combining it
Save on fees, reduce your paperwork, keep track of your hard earned money, grow your retirement fund.
But seek professional financial advice first to make sure combining is beneficial for you.
Ask your financial adviser
Many websites offer to help find and combine your super. It is quick, easy and free. You can ask your
financial adviser for help, check with your known superannuation provider or the Australian Tax Office.
A professional financial adviser can help you find an appropriate superannuation fund that will grow your
hard-earned income ready for your retirement – and the sooner you get on top of this, the better!
We’re happy to help. Contact Dev Sarker today at 1300 71 71 36.
Superannuation is the one thing you could do for your financial future this year, that could make a big difference to your retirement income. But how much do you really need?
That’s a big question.
As we know, everyone’s needs are different, unexpected expenses just crop up and none of us
know how long we will actually be in retirement. Of course, we expect the age pension to be around in years to come, but just how generous the country can afford to be with this payment, and who will be eligible, is also unknown as this may change year to year and none of us have a crystal ball.
So what exactly are the big expenses in retirement we need to budget for?
Planned or unexpected expenses such as a new car or home renovations
And what are the major impacts that could affect our superannuation?
How long you live
The rate of inflation
How much you earn on investments
Whether or not you have dependants – yes some retirees have dependants!
It is wise to have a plan when it comes to your retirement income and a professional financial adviser can help you get a plan in place that is easy for you to manage now, and meets the needs of your ideal retirement.
If you want to get your super sorted this year, give Dev Sarker a call today on 1300 71 71 36.
If you’re a recent retiree and looking to increase your superannuation savings, here’s some good news for you.
The Australian Government is proposing to make it easier for recent retirees to save more super by allowing them to contribute for a year without having to show that they’ve been ‘gainfully employed’.
The current rules
Currently, anyone below 65 can contribute to their super regardless of whether they work or not. But those aged between 65 and 74 need to meet the work test before they can make super contributions. To pass the test, they have to show that they’ve been gainfully employed for at least 40 hours over 30 consecutive days in the financial year they plan to contribute.
The government has already given members with a total super balance of less than $500,000 some flexibility to further grow their super. These individuals can carry forward any unused amount below the concessional contribution cap of $25,000 on a rolling basis for five years starting from 1 July 2018. They can use their unused cap amounts from 1 July 2019. But people between 65 and 74 must still meet the work test before they can make these ‘catch up’ contributions.
The proposed measure
Now, to encourage this age group to save more for retirement, the government is proposing to give individuals who don’t meet the work test an extra year to beef up their super savings. From 1 July 2019, those aged between 65 and 74 with a super balance below $300,000 will be able to make voluntary contributions in the first financial year that they don’t satisfy the work test requirement. Once eligible, they don’t have to remain under the $300,000 balance cap during the 12 month period.
The annual concessional and non-concessional contributions caps will continue to apply, but members can access any unused concessional contributions cap amounts they have carried forward.
The government will assess total super balances at 30 June of the financial year in which members last met the work test. So those who retire in the 2018–19 financial year may be eligible to make additional contributions.
Seek professional advice
If you’re considering contributing to your super under the proposed work test exemption, it may be wise to speak to your adviser to see how making additional super contributions may work to your advantage.