What are the New Age limits & Work Test Restrictions for Superannuation Contributions from July 2013?


This is crucial for employers, self-employed and anyone considering working past age 65. It is important to understand that it is your age on the date of the contribution that counts. Employees currently do not receive the 9% SG contribution after the age of 70 but that will change on July 1st 2013 so here is an update.

Member’s age at date of contribution Can my SMSF or Superannuation fund accept this contribution?
Under 65 No age limit or work restriction applies
65 but under 75 Mandated Employer Contributions – for example including superannuation guarantee contributions (SGC , usually 9%),                                      orMust have been gainfully employed on at least a part-time basis for at least 40 hours in any one day period during the financial year in which the contributions are made.
75 + Mandated Employer Contributions – including super guarantee contributions (SGC). You cannot make personal voluntary concessional or non-concessional contributions regardless of meeting the work test or not.

 
There is a slight leeway for people to make contributions shortly after their 75th birthday in that the rules allow for a contribution during the period 28 days after the end of the month in which the member turns 75.

Also A regulated superannuation fund may accept contributions in respect of a member if the trustee is reasonably satisfied that a contribution is in respect of a period during which the fund may accept the contribution in respect of that member, even though the contribution is actually made after that period. So if your employer forgot to make a payment and does a catch-up contribution after you have passed an age limit.

Remedy:

If a SMSF or other regulated superannuation fund receives a contribution for a member who does not meet the relevant age and work test it must reject it or return it to the entity making the contribution within 30 days of becoming aware of the breach.

For SMSF trustees the ATO appears to have a more stringent view that the deadline is 30 days from the date of the excess contribution not 30 days from when they become aware of the breach. That is an “ATO view” so not written in to the regulations and subject to challenge.

Tax File Number

The regulated superannuation fund must not accept any member contributions if the member’s tax file number has not been quoted (for superannuation purposes) to the trustee of the fund.

For more information on the existing rules refer to REG 7.04 of the SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 and for the changes http://www.moresuper.gov.au/content/Content.aspx?doc=faqs.htm

One final note – Increase to SG Contributions

Employers need to ensure they implement the new Superannuation Guarantee (SG) changes which take effect on 1 July 2013. Specifically, the SG rate will increase from 9.0% to 9.25% from that date. Further increases will apply in subsequent years until the rate reaches 12% in 2019/20

For employers; to assess if you need to pay Superannuation guarantee payments for a particular person you can use the ATO’s SG Eligibility Decision Tool

As always please contact me if you want to look at your own particular situation . We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype.

Liam Shorte B.Bus SSA™ AdvDipFS

Financial Planner & SMSF Specialist Advisor™

 Follow SMSFCoach on Twitter  Liam Shorte on Linkedin  NextGen Wealth on Facebook  SMSFCoach Blog

NextGen Wealth Solutions

Tel: 02 8853 6833,  Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

 

ABN 20 060 778 216 • AFSL No.232686

Liam Shorte is a partner in NextGen Wealth Solutions, Corporate Authorised Representative of Genesys Wealth Advisers Limited, Licence No 232686, Genesys Wealth Advisers Limited ABN 20 060 778 216.

Important information :

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

2 Hits to Retirees On The Cards – Term Deposit Rates down & Swanny On The Pillage


Danger to Retirement IncomeWait until you see the news reports this week talking about how great it is for mortgage holders and first home buyers rejoicing at the drop in interest rates by the RBA on Tuesday. In reality only 1/3 of the population has a mortgage but they get the headlines.

However the self-funded retiree or those in pre-retirement looking to save for a decent income in retirement will not be rejoicing as they have to get used to a 4 in front of their Term Deposit rates and worry about the possibility of a 3 within 12 months. These are the people who often don’t have the ability to work a little extra overtime or take on part-time job to supplement their income as older workers aren’t exactly swamped with employment offers.

It may be time to bite the bullet and lock some of your funds in for 2-5 years for the best rate you can get as anything around the 5% mark is looking very attractive and not a big risk in terms of exposure to rising rates as the USA has guaranteed they will keep their rates at or near 0% until 2015. I can’t see Australia getting to far out of step with them in the coming years and it is more likely we will have to lower rates further to weaken our dollar for the economy’s sake.

Other governments are buying our Dollar to invest in what they consider stable Australian Government Bonds and Companies. A blog by my friends at Macro Business lists new countries targeting Aussie assets as reported by various media including the AFR is scary including:

Czech Republic, Kazakhstan, Switzerland, Brazil, Poland, Hong Kong Vietnam, Abu Dhabi, Kuwait,  Qatar , South Korea and of course China with possibly Peru, Malaysia and Singapore as well. All their interest means demand for our currency rises and the exchange rate goes up which the RBA has to try to manage through Interest rate strategies. All that does not bode well for your average Aussie SMSF investor seeking yield or in more simple terms income.

So time to either load up with the best long-term interest rate you can get risk free or prepare to re-enter or increase your exposure to the share market and other sources of income. Be careful chasing yield and understand the risk of any investment paying more than 1-2% above the RBA’s 3.25%.

The second possible hit is harder for me to discuss as I tend to be apolitical in my views under normal circumstances but I feel I have to say something as the leaks to the media in the last few weeks seem to be softening up the SMSF sector for some hard hits.

So on top of the interest rate cuts to your income  we have a Treasurer likely to just compound the problem because in his desperation not to give the Liberals ammunition to throw at him over budget deficits appears willing to destroy the confidence in the Australian Superannuation system by dipping his hands in to the “honey pot” that is the retirement savings of everyday Australians. He is being goaded on by the unions and industry fund sector who control a massive position of the retirement pot but mostly those with insufficient savings to fund their retirement. They seem hell-bent on making sure NO ONE can afford a comfortable retirement and all will depend on an Age Pension to some degree. They have Self Managed Super Funds (SMSF) in their sights! It may be more layers of compliance fees or reduction in tax concessions or some similar theft of your savings by stealth but we know something is coming so better to be prepared.

I urge all SMSF investors and self funded retirees in general to get on the front foot before the Half Year Budget update and be prepared to speak up to your local member of parliament and write tot he press now rather than later to try to stop this government pillaging your savings to fund a  meaningless surplus. If the opposition took the pressure off the need to bring in a surplus that would help too but I know I am dreaming with that idea. The short-term gain of accessing funding from our Superannuation will lead to a huge drop in confidence in a system that has already been hammered in the last few years by Government changes and the CFC.

For further information on the issues raised in this blog please contact our Castle Hill SMSF Centre or Windsor Financial Planning Office.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

Tel: 02 98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Don’t lose your insurance cover in the haste to rollover to a SMSF.


Just because you are unhappy with your superannuation investment results is no reason to put you or your family’s future at risk by losing your insurance cover in the process of changing.

don't lose your insurance in a rollover to SMSF

A good professional like an SMSF Specialist Advisor™ will always ensure you assess your insurance needs before withdrawing.

This issue is becoming even more relevant now that the new SMSF rules require Trustees to consider the member’s insurance needs regularly. See here for more detail.

Ok, so you have decided to start your own Self Managed Super Fund or move to one that you feel better meets your needs. That is fine, but one of the things you should look at doing is protecting any cover you have in your current fund by either keeping some money in your current fund to pay for ongoing insurance premiums or taking out replacement insurance cover in the name of your new SMSF.  (more…)

Don’t depend on working longer to save for your Retirement Income


Looking to RetirementMany clients believe delaying their retirement is a solution to inadequate savings, but they often find themselves out of the workforce sooner than they’d planned. None of us has that crystal ball!

It is likely that the shortfall in retirement savings here in Australia stems in part from our “she’ll be right” attitude towards life, which leads us to believe that we do not need to start saving early and that somehow it will all work out ok.

Delaying retirement can be a powerful boost to your superannuation nest-egg. But relying on the ability to work for a few extra years to stretch retirement savings out a little longer is fraught with risk and does not reflect personal and family health or other issues that may arise. As an example I have had some clients forced to retire to look after their grandchildren due to the illness of the parent.

If you played with any retirement planning calculator or have spoken to an adviser, the “work a little longer” solution would have been investigated and many put it forward as the solution to the GFC “dip” (read plunge) in savings.

The concept is easy to grasp: By working longer then you originally planned, you get more years of concessionally taxed growth in your superannuation accounts especially if you used a Transition to Retirement Pension from 55 or 60. You can also continue to salary sacrifice and make non-concessional contributions while getting the benefit of the Senior And Pensioners Tax Offset (SAPTO) that I mentioned a few weeks ago here.

The idea is the longer you work and save and more you get into a superannuation income stream then your capital will last longer and you may also benefit from more Age Pension when required.

Back to reality with a jolt!

But there is a huge disconnect between workers’ expectations and retirement reality. Over half of the retirees surveyed in a US study last year said they left the workforce earlier than planned, and just 8% of them said that positive factors — such as the ability to afford early retirement — prompted the move. For the vast majority of early retirees, negative circumstances, such as personal or spouse health problems or company downsizing played a role.

40% of Australians will suffer a critical illness before age 65 (Cologne Life Re study). They will most likely survive but their retirement funding will be devastated.

The 2015 Productivity Commission report on post-retirement shows that about 40 per cent of Australians who retire between the age of 60 and 64 do so involuntarily, either because of their own or a family member’s ill health, or redundancy.

For those aged between 65 and 69 who retire involuntarily is not that different, while for younger age groups most people who retire do so involuntarily.

Retirement ages

Clearly, workers relying on delayed retirement are rolling the dice. Yet, most people discount the future so much that they’re willing to take that gamble. May hope that an inheritance will save the day but do not realise that age care costs and parents living longer may eat heavily into any expected inheritance.

Strangely the people most likely to plan on working a few more years to boost their retirement security may actually have the least ability to postpone their retirement. People who suffer an illness or injury  are more likely than those in good health to have pushed back their expected retirement date in recent years, according to  a report from consulting firm Towers Watson. Yet health problems or disabilities were cited by more than half of retirees forced to retire earlier than planned.

Don’t put you head in the sand – start now

As psychologists are quick to point out, we all have that inner voice that loves to procrastinate who loves to put off till tomorrow what we should do today – beause its “all too hard to get your head around”. Saving more today is a sure thing, and extra years in the workforce are anything but. If you know you don’t have enough, you should start saving more today, because that’s by far the less risky alternative.

Let’s look at an example using the Retirement Planner on the MoneySmart.gov.au site for a 55-year-old pre-retiree with just $30K in superannuation. If she earns $80,000, makes $17,500 annual salary sacrifice contributions (in addition to Employers SGC contributions of 9.5%)  and earns a 7.5% return pre retirement and 6.5% after, she could be looking at an Income in retirement of $32,143 by age 67 including the Age Pension. If she’s forced to retire at that point, she’s still in better shape than most Australian’s. And if she can continue working, she  counld improve on this lifestyle with a better retirement income.

Retirement Income

A final don’t is cancelling TPD or Income Protection insurances to save money while in your most productive earning years (read here for more on that subject). The loss of 5-10 years of earnings potential is one guaranteed way to destroy your lifestyle in retirement. Your ability to earn is your biggest asset

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

 Follow SMSFCoach on Twitter Liam Shorte on Linkedin NextGen Wealth on Facebook   

Verante Financial Planning

Tel: 02 98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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