Budget Update – Plan Your Retirement

Major changes to superannuation announced last night, more bad than good. The bottom line is, you need to start planning your retirement sooner rather than later. Speaking to a financial advisor has never been more important.

The Good 

  • You can now put money into super up to the age of 74 without meeting a certain set of circumstances
  • There is now, no distinction between the self employed and employed when claiming a tax deduction for super contributions
  • The threshold for making a spouse contribution has been lifted from $10,800 pa to $37,000 pa, the maximum tax offset remains at $540.

The Bad

  • The amount you can “Salary Sacrifice” has been reduced to $25,000 pa down from $30,000 & $35,000 (depending on your age) this cap includes any employer sponsored contributions as well. This will affect those planning on making large contributions closer to retirement.
  • High income earners will pay 30% tax on super contributions on incomes over $250,000 pa rather than $300,000 pa previously.
  • Pension accounts are limited to $1.6M in size, the balance above this must remain in superannuation. Not likely to affect many, but for some will result in more tax being paid and more complexity in their affairs.
  • Tougher tax treatment for those with defined benefit accounts, mostly affecting those in SA with UniSuper, CommSuper, Super SA Lump Sum scheme and StatewideSuper – Salarylink accounts.

The Ugly

  • Death taxes have been essentially introduced with abolishing anti-detriment benefits. To minimise death on your estate some careful planning will have to be undertaken.
  • After tax contributions to super now have a lifetime limit of $500,000 rather than $180,000 pa. This is a significant reduction and will be back dated to 1 July 2007. This has big ramifications for those planning on maximising their Centrelink benefits, or contributing funds from the sale of businesses and/or investment properties to super.
  • Government employees who contribute to Super SA – Triple S accounts will have their essentially unlimited contributions to superannuation brought back inline to the rest of the Australia. Fair for everyone else but a huge reduction in the potential tax savings for government employees.
  • The earnings on a transition to retirement (TTR) accounts will no longer be tax free and will instead be tax at 15%, which will significantly reduce the benefits of the TTR strategy recommended to those age 55-64.

To learn more contact us on 08 8238 0100 to make an appointment with our financial advisor today.

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