The Repercussions of Superannuation on the Common Man


It is the end of the financial year & the pockets are screeching in need of order & sustainability for the future of yours. What should be done? The answer lies in managing & directing your income towards Superannuation fund. The reform passed in the Federal Budget of parliament June 2016- 2017 will be making its major effect incepting from 1st July.

To make the best before the “DUE DATE”, it’s still not late. Head to a Self Managed Superannuation (SMSF) Auditors in Melbourne or your city where you work. An experienced auditor will get your accounts running smooth which will help you yield matured benefits in the future.

Here’s the “long story – short”, these are the four different stages where you receives Tax-Benefits on Superannuation.

  • Concessional (before-tax) contributions: when you, or your employer, makes concessional (before-tax) contributions
  • Non-concessional (after-tax) contributions and the co-contribution: Indirectly, when you make a no concessional (after-tax) contribution: although this type of super contribution does not directly receive any tax incentives – the investment earnings on those super contributions are concessional taxed (see next bullet). Also, you may also receive a tax incentive when you’re eligible to receive a tax-free co-contribution from the federal government. You’re eligible for it when you make non-concessional (after-tax) contributions of a certain amount, and your annual earnings are below a certain level of income.
  • Investment income on super fund investments: when your super fund earns income on fund investments, and note that investment income is earned on both pre-existing super investments, and new investments purchased with your most recent super contributions (both concessional and non-concessional ones)
  • Superannuation benefit payments: when you eventually receive your superannuation benefit (around the age of 64 or more)

How these reforms recently sanctioned will IMPACT your life’s ferry wheel?

Before we get to the above Question, we need to know…What these reforms incorporate in Superannuation Sector?

Chief Reform includes,

$1.6 Million Pension Cap

From 1 July 2017, the government will introduce a $1.6 million cap on the total amount that can be transferred into the tax-free retirement phase for simple account based pensions. This is known as the general transfer balance cap. The general transfer balance cap will be indexed in $100,000 increments in line with CPI.

Superannuation benefits accumulated in excess of the cap can remain in the accumulation account, where the earnings will be taxed at up to 15%.

Reduction of Concessional Contributions Cap to $25,000 p.a.

Currently, individuals can make concessional (pre-tax) contributions up to $30,000 for those aged under 49 at 30 June of the previous financial year and $35,000 otherwise.

From 1 July 2017, the Government will lower the annual concessional contributions cap to $25,000 for all individuals aged under 75. The cap will be indexed in $2,500 increments (instead of the current $5,000 increase) in line with wages growth.

Lowering the Non-Concessional Contributions Cap to $100,000 p.a.

From 1 July 2017, the Government will reduce the annual non-concessional (after tax) contribution cap from $180,000 to $100,000 per year, which is four times the annual concessional contributions cap. The cap will be indexed in line with the concessional contributions caps.

Allowing Catch-up of Concessional Contributions over a span of Five Years

Individuals withholding total superannuation balance of less than $500,000 as of 30 June, 2017 of the previous financial year will be able to make carry-forward concessional super subsidy from 1st July, 2017. For the people above the age-limit of 64 to 75 will also have to meet the work test in order to access these arrangements. Eligible individuals will be able to access their unused concessional contributions cap space on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

Only unused amounts accrued from 1st July 2018 can be carried forward. This means the first year in which you can access unused concessional allowance is the 2019-20 financial year. This increased flexibility will make it easier for people with varying capacity to save and for those with interrupted work patterns, to save for retirement and benefit from the tax concessions to the same extent as those with regular income in the long run.

To make this heap of work: segregate & get in order & to save the best for the rest of yours & the family, the idea of DIY-Superannuation should be skipped as spending now will reap thrice the cost what you pay behind hiring a SMSF Professional. They are thorough financially experienced executives & they know the right cuts & bits to make & join to get you the best for your retirement.

Now, coming back to the Question; How will it IMPACT your Life?

The custodians of self-managed superannuation funds (SMSF) should review this Check-list before 30th June, 2017. This will help in putting the hierarchy of administration effectively & complacently. It can be termed as SMSF Administration for Advisers for better clarity of reforms & its structure.

  • The minimal pension must be paid to receive Tax Free status on financial rewards supporting a pension to Australian Tax Office before 1st July, 2017. The basic requirement on paying pension must be checked properly to ensure no-further legal problems.
  • Donation or Gift should be received in the form of FUND only. It’s a prerogative idea to add any more contributions to the fund to ensure maximum benefits well before 1st July, 2017.
  • Super stream necessity should be URGENTLY met in order to concise & check the employer contributions are considerably valid or not. If not, these need to be registered on Electronic Service Address (ESA). These are used to check the authenticity & reliability source of contribution. For these, one need to ask for SMSF members for ESA, ABN & bank account details to register with ESA duly without any future problem.
  • Personal assets including hierarchal antiques of esteemed value or any other priced collectibles should be wary of the rules by complying with SMSF by providing Insurance covers which are necessary. Also, it states that it shouldn’t be leased to anyone for profitability purpose or business deals goof-ups.
  • Undeclared Assets should be listed with proper financial documentation as in case of Ex: someone holding real estate & other portfolios. If not done, it can cost severe consequences legally. Lastly, Insurance covers in health, trauma or any other disabilities or causalities should be taken care by consulting Asset Management Advisor.

Concluding I would recommend instantaneously to get hold of an SMSF Professional (if still left) who will get the house in order & secure your kin’s future as well as of future generation economically as well as mentally, leaving you stress-free.

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