Putting super
on the map: your guide to
post
1 July changes
First job; business-owner; new family; near retirement; retired... Whatever your stage of life, super changes will affect the way you plan for your future lifestyle.
Pre-tax contribution limit of
$50,000 pa for all ages
This includes salary sacrifice
arrangements, where your employer contributes pre-tax salary
to your super fund on your behalf (sometimes referred to
as concessional or deducted contributions).
This change means that those who start to build up their
super at a younger age have more margin, as well as more
time, to prepare for their future.
Close to retirement? A
special transition phase means you can still increase
your super balance.
To buffer the
change for those approaching retirement and wanting to
contribute pre-tax amounts to super, a transitional limit
of
$100,000 per financial year is available for those over
50, but only before 1 July 2012.
Not 50 yet?s
If you aren’t 50 now, but turn 50 before
1 July 2012, you are eligible to contribute up to the higher
limit
for the time period that you are over 50, without incurring
extra tax penalties.
After-tax contribution limit of $150,000 pa
After-tax super
contributions (sometimes referred to as non-concessional
or undeducted contributions) are limited
to $150,000 per financial year for 65-74 year olds who
satisfy the work test or $450,000 averaged over three years
for under 65s.
Tax-free benefits for over 60s
Lump sums and pensions paid
from a taxed super fund are tax-free if you are over 60.
This is likely to significantly
change the way people treat their super and retirement
saving, and could prove to see super become one of the
most tax-effective investment methods for many Australians.
Speak to your adviser to see if you are making the most
of your own super.
On top of paying no tax and having more money in retirement, this could mean not having to submit a tax return at all if your only income is from your super.
No limits to what you can accumulate
Reasonable Benefit
Limits (RBLs) have been abolished – so
you can accumulate your super without having to worry about
exceeding any limits for tax purposes.
However, you have to plan your super savings carefully, as new contribution limits could mean that more frequent contributions over a longer period of time are necessary to build up the amount you need.
You will be able to continue making super contributions up to the age of 75 if you pass a work test.
Super changes for small businesses
If you are self-employed,
here are some of the changes that could help boost your
super savings and better secure
your retirement:
| > | Contribute up to a lifetime limit of $1million from the sale of your business, which could be a good opportunity for eligible business owners to accumulate tax effective retirement savings in a shorter time. |
| > | Access the Government Co-contribution, where the Government will add up to 150 per cent of your contribution automatically, based on limits. |
| > | Claim a full tax deduction on your personal contributions to super, making saving for retirement through super even more attractive. |
If you are self-employed you might be so busy running your business that you forget to build up super for retirement. While you may plan to retire on the sale of your business assets, investing in your super can diversify your retirement funds as a safety net in case your business is impacted by unforeseeable social or economic conditions.
For information on new tax concessions for small businesses, see ‘Mind your own Business’ in this Count Report.
New pension income stream
rules – no maximum withdrawal
From
1 July 2007, you will be able to nominate any payment amount
you wish to receive out of your pension, provided
the amount is the same as, or higher than, the new minimum
payment limit.
There will no longer be a maximum payment amount per year, except in the case of a ‘transition to retirement’ income stream. This means more flexibility over the way you choose to fund your retirement.
If you had elected to receive the minimum pension previously, the new minimum amount might not be suited to your financial plans anymore, so check with your adviser to see how your retirement lifestyle could be affected.
Tax-free death benefits for dependants
Death benefit payments
will be tax-free to dependants, while the ‘taxable component’ of
a death benefit paid to a non-dependant will generally
be taxed at 16.5
per cent.
Next: Taxing lyrical: top tips for returns |
As at
17 August, 2007 |
