INSIGHTS WITH EVALESCO
There are a number of superannuation changes that will take effect on the 1st July 2021. We share the key changes below.
Here are the recently passed super bills
Your Super, Your Future
More Flexible Superannuation Bill
Self-Managed Superannuation Funds Bill
Your Super, Your Future was passed by the Senate on the 17th June 2021, and is a bill that will be most impactful for younger members. Consider that when you setup your very first superannuation fund, going forward, that fund will in effect be stapled to you and as you change jobs it will move with you. There are pros and cons with this change as stapling will help reduce multiple accounts, however it can tie a member to an underperforming fund.
The government’s More Flexible Superannuation Bill was also passed through Senate on the 17th June and will allow people aged 65 to 66 to bring forward up to three years of non-concessional super contributions under the “bring-forward rule”.
This bill was passed with amendments that include the following higher concessional contributions for individuals aged 65 and over:
The cap for concessional contributions will increase from $25,000 to $27,500
The cap for non-concessional contributions will increase from $100,000 to $110,000
The third bill that was passed was the Self-Managed Superannuation Funds Bill that allows the increase of members in self-managed and small APRA funds from four to six. Outside of that a number of changes have started to flow into the system, including;
Superannuation guarantee increase to 10%
The superannuation guarantee is the minimum percentage of your ordinary time earnings that your employer has to pay into your superannuation fund, if you meet certain conditions. On the 1st of July 2021, the superannuation guarantee will increase from 9.5% to 10% and will continue to increase by 0.5% annually until it reaches 12.0%.
General transfer balance increase
The transfer balance cap is the maximum total amount of superannuation that can be transferred into the retirement phase. If you have more than one super account, the combined balances are used to calculate this amount. On the 1st July 2021, the general transfer balance cap will also increase from $1.6 to $1.7 million.
Pension transfer balance cap (TBC)
Individuals who start their first retirement phase income stream on or after 1 July 2021 will have a tax exempt retirement income stream of $1.7 million. A proportionate rule will apply if a person has previously triggered their TBC before indexation on 1 July 2021.
If a person did not utilise the entire $1.6 million cap, indexation will be a proportion of the amount remaining against their cap (as a percentage of the $100,000 indexed amount).
If a person has fully utilised $1.6 million TBC before indexation on 1 July 2021, their personal cap remains at $1.6 million. That is, no indexation applies.
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The amount of super you’ll need when you retire depends on your big costs in retirement and the lifestyle you want. The Associate of Superannuation Funds of Australia (ASFA) estimates for a single $44,224 a year and for couples $62,562 a year is how much you may need. This is only an indicator and our advisers assess everyone’s individual circumstances.
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After our initial phone call to discuss why you are seeking a financial adviser, we arrange a discovery meeting that outlines what is important to you, your current position, our areas of advice, our approach. We then present a Statement of Advice (SoA) to discuss your goals and our recommendations and go through the steps of how to proceed to the implementation stage. After signing the SoA, we discuss your questions, get you to sign the authority to proceed and complete any application forms before implementing the recommendations detailed in the SoA.
One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future
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