Three timely considerations to support retirement under the new super rules

On November 23, the complex proposals heralding Australia’s biggest change to super in 10 years received the approval of the Senate. And while the reforms mean that it will soon become much harder to build your wealth entirely in super, the finalisation of the legislation clearly reveals how the Government intends those new rules to be implemented.

Of particular importance is knowing that there is now limited time available to review your current strategies and maximise your wealth in super before the new rules come in to effect. To start taking advantage of this six-month window of opportunity, we suggest you investigate the following three considerations as a priority.

1. Review your eligibility to make non-concessional contributions to super before 30 June 2017

You might want to consider bringing forward non-concessional contributions into this current financial year. And it’s important not to wait – if your total super balances reach $1.6 million after 30 June 2017 then you’ll not be able to make any additional non-concessional contributions. And with the prospect of those limits being further reduced at the next federal election, relying on being able to get the money in later has its own risks.

2. Weigh up the advantages of holding your money inside super

Tax savings can be significant when compared to holding the same amount of money in a higher tax rate environment – particularly when compounded over 10 to 20 years. If you’re considering the sale of an asset, for example property, or transferring shares to boost your super; strategies such as ‘contribution reserving’ can help you manage the capital gains implications.

3. Consider excess funds if you’re a retiree affected by the $1.6 million pension transfer limit

You’ll need to make several decisions regarding any funds above the $1.6 million pension transfer limit – from re-distributing them to an eligible spouse to rolling excess amounts back to the accumulation phase. If you hold an SMSF, the latter is expected to be the most tax effective and administratively efficient option. It’s worth noting that although amounts above $1.6 million cannot be held in a tax-free retirement pension account, they don’t have to leave the super system all together and the tax rate within the super accumulation phase is still very attractive.

The reforms are complex so consider seeking advice to understand the full picture

Ask yourself, ‘How do I want my retirement assets to look not just at 1 July 2017 but in two, five and 10 years’ time’. While that’s not always easy to predict, understanding the new rules and the potential impact they may have on your long-term planning may give you a better chance of reaching your retirement goals.

This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.

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Whether you’ve had the same super fund or investment structure in place for some time, your personal circumstances and balance may have changed – which is why it makes sense to review your arrangements. But where do you start? By using our simple guide, we show you five key areas you should consider when comparing options, which can help make it easier to make a more informed choice about your super and determine the most appropriate solution for you.

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Nerida Cole

Investment Committee Member

Nerida has more than 20 years of industry experience. Through her expertise in strategic financial planning and advice, Nerida has helped individuals and families from diverse backgrounds to manage their finances and superannuation during their careers and into retirement. 

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