Lost Superannuation Totals In The Millions – How To Make Sure You’re Not Adding To It

Finding and consolidating your lost super is an important step in managing your retirement savings effectively. Here’s a step-by-step guide on how to do it:

Create a myGov Account:

If you don’t already have a myGov account, visit the myGov website (https://www.my.gov.au/) and sign up. You’ll need to provide personal information and create login credentials.

Link your myGov Account to the ATO:

Once you have a myGov account, log in and navigate to the ATO section. Follow the prompts to link your myGov account to the Australian Taxation Office (ATO). This will enable you to access your superannuation information.

Access Your Super Information:

After linking your myGov account to the ATO, go to the “Super” section. Here, you will be able to view details of all your past and current super accounts, including any lost or forgotten ones. You’ll also see any funds held by the ATO on your behalf.

Consolidate Your Super Funds:

Once you’ve identified your lost super accounts, consider consolidating them into a single fund. This can make it easier to manage your superannuation and potentially reduce fees associated with multiple accounts.

Compare Funds Before Consolidating:

Before consolidating your super funds, it’s essential to compare the performance and fees of your current and potential new super funds. Factors to consider include:

  • Investment returns: Look at the historical performance of the funds.
  • Fees: Compare the annual fees, administration fees, and any other charges associated with each fund.
  • Insurance: Check if you have insurance within your existing funds and whether it will be affected by consolidation.
  • Investment options: Consider the investment options available in each fund and choose the one that aligns with your financial goals.

Consolidate With The Best Fund:

Once you’ve researched and selected the fund that offers the best combination of returns, fees, and services, initiate the consolidation process through your chosen fund. They will guide you through the necessary steps to consolidate your super accounts.

Monitor Your Superannuation:

Keep track of your superannuation periodically to ensure it continues to align with your financial goals. You can use your myGov account to monitor the performance and adjust as needed.

Remember that superannuation is a long-term investment, and your choices today can significantly impact your retirement savings. It’s essential to seek financial advice if you’re unsure about which fund to choose or if you have a complex financial situation. Additionally, stay informed about changes in superannuation regulations to make the most of your retirement savings.

Everything You Need To Know About SMSFs

A Self-Managed Super Fund (SMSF) is a unique and increasingly popular retirement savings vehicle in Australia.

SMSFs offer individuals and families greater control, flexibility, and investment choices than traditional superannuation funds.

In this article, we’ll explore what SMSFs are, how they work, their benefits, and some considerations for those interested in establishing and managing one.

What is an SMSF?

An SMSF is a type of superannuation fund that allows individuals to manage their own retirement savings.

Unlike industry or retail super funds, where investment decisions are made by professional fund managers, an SMSF puts the control firmly in the hands of its members, who are also the trustees of the fund. This level of control is what sets SMSFs apart.

How Does an SMSF Work?

An SMSF can have a maximum of four members, all of whom must also be trustees or directors of the corporate trustee. As trustees, members are responsible for making investment decisions, complying with legal obligations, and managing the fund’s assets. SMSFs can invest in a wide range of assets, including shares, property, cash, and fixed income.

Benefits of an SMSF:

  • Control and Flexibility: SMSF members have complete control over their investment choices and strategies. This allows for a highly tailored approach to meet specific financial goals and risk appetites.
  • Tax Efficiency: SMSFs offer potential tax advantages, particularly for those in retirement. Capital gains, for instance, are often taxed at a concessional rate if the assets are held for more than 12 months.
  • Estate Planning: SMSFs provide estate planning benefits, allowing members to dictate how their assets are distributed upon their passing. This can be especially important for complex family situations.
  • Asset Diversification: With greater control, SMSF members can diversify their investments across various asset classes, reducing risk and increasing the potential for returns.
  • Borrowing for Investments: Under certain conditions, SMSFs can borrow to invest in assets like property, which can magnify returns and portfolio diversification.

Considerations for Establishing and Managing an SMSF:

  • Compliance: SMSFs must adhere to strict regulatory guidelines set by the Australian Taxation Office (ATO). Non-compliance can result in penalties or the loss of tax concessions.
  • Investment Knowledge: Managing an SMSF requires a strong understanding of financial markets, taxation rules, and investment strategies. It’s essential to keep abreast of changing regulations.
  • Costs: While SMSFs can be cost-effective for those with substantial assets, they may not be suitable for smaller balances due to administrative and compliance costs.
  • Time Commitment: Trustees need to invest time in managing their SMSF, including record-keeping, administrative tasks, and annual auditing requirements.
  • Professional Advice: It’s advisable to seek professional guidance from accountants, financial planners, or SMSF specialists when setting up and managing an SMSF. Their expertise can help navigate complex regulations and optimize investment strategies.

Self-Managed Super Funds (SMSFs) have become a valuable retirement planning tool for many Australians, offering unparalleled control, flexibility, and investment options.

However, the decision to establish and manage an SMSF should not be taken lightly. It requires a solid understanding of financial markets, compliance obligations, and a long-term commitment to effective management.

When approached with diligence and professional guidance, an SMSF can be a powerful vehicle to achieve financial security and retirement success.

It’s Never Too Early To Plan Ahead For Retirement

Retirement planning is a crucial aspect of financial well-being, and for Australians, it holds particular significance due to the country’s aging population and changing retirement landscape.

To ensure a comfortable and financially secure retirement, Australians should consider various factors and strategies when crafting their retirement plans.

Superannuation

Australia’s mandatory superannuation system is a cornerstone of retirement planning. As an employee, your employer contributes a portion of your salary to a superannuation fund, which is invested on your behalf. It’s important to keep track of your superannuation accounts, consolidate them if necessary, and choose appropriate investment options to maximise your retirement savings.

Government Assistance

Familiarise yourself with the government support available to retirees, such as the Age Pension. Eligibility criteria are based on factors like age, residency, and income. Understanding these programs can help you maximise your retirement income.

Set Clear Goals

Determine your retirement goals and lifestyle expectations. This will guide your savings and investment strategies. Consider factors such as where you want to live, your healthcare needs, and your desired leisure activities during retirement.

Start Early

The power of compounding interest makes early retirement planning essential. The sooner you begin saving, the more time your investments have to grow. Consider salary sacrificing into your superannuation to take advantage of potential tax benefits.

Diversify Investments

Diversification can help manage risk in your investment portfolio. Spread your investments across various asset classes, such as stocks, bonds, and real estate, to achieve a balanced and resilient retirement portfolio.

Seek Professional Advice

Consulting a financial advisor or planner can provide personalised guidance and ensure your retirement plan aligns with your unique circumstances and goals. They can help you navigate complex financial decisions and optimise your retirement income.

Budget and Reduce Debt

Create a budget to track your income and expenses. Minimise unnecessary spending and focus on reducing high-interest debts, such as credit card balances or personal loans, before retirement.

Plan for Health Care

Health expenses can increase in retirement. Understand your healthcare options, including private health insurance and Medicare, and budget for potential medical costs.

Consider Downsizing

As you approach retirement, consider whether downsizing your home is viable. This can free up equity for your retirement and reduce ongoing housing-related expenses.

Stay Informed and Adapt

The retirement landscape is continually evolving. Keep up with changes in legislation, taxation, and investment opportunities to adjust your retirement plan accordingly.

Planning for retirement in Australia requires careful consideration of superannuation, government assistance, personal goals, and financial strategies.

With proactive and informed retirement planning, Australians can look forward to a financially secure and fulfilling retirement phase of life.

Remember, it’s never too early or too late to start planning for your future.

The Power Of Compound Interest On A Superannuation Fund

The compounding nature of superannuation means small losses early in your career can lead to significant losses later on – but it also means that making voluntary contributions can make a big difference.

Every year, money goes into your super fund, as paid by your employer. This is determined by the super guarantee rate, which is currently 11% of your wages. Your super fund than pays you interest or earnings as well (on top of this) from the returns on the investments they’ve made with the money in the fund.

Generally, your superannuation is not available to draw from unless it is due to an early condition of release. However, during the height of the pandemic in 2020, the Australian government implemented an early-access super scheme (where individuals could take out up to $20,000 from their super).

From a survey conducted by the Australian Institute of Family Studies, many of those who partook in the scheme and used the funds withdrawn to at least partially alleviate financial hardship and stress during the pandemic. This may have included paying off the mortgage, paying rent or even easing the burden of buying groceries.

However, this may have resulted in them losing out on the benefit of that additional $20,000 compounding over time in their fund.

Compound interest results from an investment over time. This is because the interest is generated based on the amount within the fund in that year and then added to the fund. This is the total that the following year’s interest will be calculated based on.

Take, for example, an 18-year-old individual with $5,000 in their superannuation fund. If this amount accumulates interest at 7% per annum, this could increase exponentially by the time they reach their preservation age.

Over 55 years, the accrued interest at the rate of 7 per annum from that initial $5,000 could total over $200,000 (potentially). Compound interest on this superannuation fund could assist them year after year with increased gains and profit.

If you were to take out $20,000, you have lessened the amount that the interest can be calculated on, and the growth potential.

But that is where voluntary contributions can assist.

You can make voluntary contributions to boost your super account over time, up to a specified cap. If done in a specific way, it can also reduce the tax you pay.

For more information about how you can make voluntary contributions, including caps, methods and tax opportunities, it is best to speak directly with a professional or licensed adviser.

Estate Planning, Illness And Why You Can’t Afford Not To Plan Ahead

When estate planning, most people focus on what will happen to their family and their assets after they pass, often neglecting to consider what would happen if they were to become ill or incapacitated.

Falling ill can be a very stressful and traumatic time for you and your family, especially if you are the primary financial provider for your household. Taking the time to become prepared and evaluating your financial situation can help you to prove if you are out of work for health reasons. It is essential to ensure you know of every entitlement available should you become sick or incapacitated.

Income Protection:

Income protection is a form of insurance that pays you a regular cash amount if you are unable to work as a result of a sudden illness, covering up to 75% of your income for a set period of time. You can insure your income through agreed value, where you decide the amount you wish to receive each month, or indemnity, where you prove your income at the time of claim rather than during application. Generally, you can claim part or all of your income protection insurance premiums that are taken outside of your super as a tax deduction, helping you save more on your tax bill. However, you are not entitled to deductions for a policy that compensates for a physical injury. Other insurance policies include health insurance, trauma cover or total and permanent disability (TPD) insurance.

Incapacity Plan:

Incapacity planning is a process through which capable adults make choices and plans about future events that are a possibility. It addresses what you would want to happen in relation to health care decisions and financial matters should you lose your ability to make or express choices. In the event you are seriously injured or develop an illness such as dementia, you may not be able to pay bills, file taxes or manage your assets and investments. Incapacity planning allows for those types of things to still be done by someone with the authority to handle them. An incapacity plan should contain the following documents:

  • Living Will: states what kind of health care you wish to receive or refuse to receive, should you lose consciousness or capacity. Unlike a last will and testament, your living will has nothing to do with what happens to your property after you die.
  • Financial power of attorney: allows you to choose someone who will have the legal authority to manage your financial affairs if and when you lose the ability to do so yourself.
  • Medical power of attorney: allows you to choose someone to have the legal right to make medical choices on your behalf if you cannot make them on your own. You should discuss your wishes with the chosen representative before you are incapacitated and they need to make medical decisions.

Early Release of Super:

There are very limited circumstances in which you can access your super before you retire. You may apply for early release on the grounds of:

  • Incapacity: if you suffer permanent or temporary incapacity.
  • Severe financial hardship: if you have received Commonwealth benefits for 26 continuous weeks but are still unable to meet immediate living expenses.
  • Compassionate grounds: to pay for medical treatment if you are seriously ill.
  • Terminal medical condition: if you have a terminal illness or injury likely to result in death within 2 years, as certified by two registered medical practitioners, at least one of whom is a specialist

How Could You Benefit From Effective Estate Planning?

Estate planning is more than just having a will. It is about ensuring that a person’s estate is passed on to their beneficiaries in the most tax-effective and financially efficient way possible when they are gone.

Getting early advice on setting up an estate plan can help you to achieve peace of mind in knowing that your wealth will be passed in the most tax-effective way and ensure it is done according to your wishes, often a problem with a simple will.

An estate plan maximises your assets and considers other non-financial matters such as caring for dependent children, medical treatment and accommodation if you are incapacitated. It also considers your charitable, community and cultural requirements.

If you die without a will, your assets are distributed by following a standard statutory formula, and, likely, distribution will not play out the way you would have liked.

For those with a will, it may only cover what to do with your personally owned assets, and other considerations like superannuation, trusts, and business assets may have been left out.

In developing an effective action plan for dealing with your estate, the following considerations should be made:

  • How will your business wealth be dealt with?
  • How should your superannuation be dealt with after your death?
  • Who will receive your gifts and legacies, and when should they be given?
  • Who will be appointed executors of your will?
  • Who will control your non-estate wealth-holding entities, including family trusts?

An estate plan should balance the lifetime enjoyment of your assets with the preservation of those assets for your family after your passing. It should be cost-effective, simple to understand and operate and be revised regularly.

An estate plan is something that should be considered, no matter how young or old you are. To begin your estate planning journey, why not speak with a professional adviser?

It’s The Last Year To Use Unused Contribution Limits From 2018/19…

Is it time to play catch up with your super contributions?

Every financial year, the cap for concessional and non-concessional contributions is set at a specific limit. For the 2022-23 financial year, this was set at $27,500 for concessional contributions.

If you make or receive concessional contributions of less than the annual contributions cap, you may be able to accrue any unused amounts and carry them forward for use in later financial years.

This allows you to (potentially) make larger concessional contributions in a single financial year if the concessional cap hasn’t been completely used.

Most working Australians will pay at least part of their concessional contributions through their employment (their super guarantee contributions). However, any amounts left over from that financial year can be applied to your carry-forward limits.

An Example Of Bringing Forward Contributions

Let’s assume that a registered nurse made a concessional contribution total of $15,000 in the 2018-19 financial year, out of the total cap of $25,000. This means they have $10,000 in unused amounts to be added to their total cap for the following year (brought forward).

If in the following year, they make $20,000 in concessional contributions, out of the total cap of $25,000 (for the 2019-20 year), they will have an additional $5,000 in unused contributions to be added to their total unused amount (now $15,000).

In the following year, they can make up to $40,000 in contributions total

Any unused cap amounts can be carried forward for up to five years. Your catch-up contributions for the 2023-24 financial year (this current year) can accrue as far back as the 2018-19 financial year; however, once the five-year limit passes, they will expire.

To be eligible to make catch-up concessional contributions, your total super balance must be below $500,000 at the prior 30 June.

You also need to be careful about how the contributions are classified – in some cases, the contributions may count towards your income (such as amounts contributed by salary-sacrificing or making personal deductible contributions) and result in potential  Division 293 issues.

Under the Division 293 tax rules, if your income and concessional contributions total more than $250,000 in a financial year, you may have to pay an additional 15% tax on some or all of your super contributions.

Before making additional contributions to your super, it is highly recommended to speak with a professional adviser for guidance on eligibility, benefits and whether it is the right course of action for you.

Super Guarantee Obligations For Employers In 2023-24 Financial Year

While the hustle and bustle of operating and managing a business can occupy your mind, it’s important not to forget your superannuation obligations to your employees.

Those who fail to meet their super obligations risk facing severe and even damaging liabilities, penalties and even potential imprisonment. Are you aware of your obligations?

Employees (after entering the workforce) should have a ‘stapled’ super fund that you must pay their super into or the right to nominate a super fund. However, if an employee is not eligible to choose, does not have a fund or fails to notify the employer, the employer must pay their contributions into an employer-nominated or default fund.

The employer-nominated or default fund must be a complying fund (meets specific requirements and obligations under super law) and be registered by the Australian Prudential Regulation Authority (APRA) to offer a MySuper product.

Some super funds may ask that an employer becomes a ‘participating employer’ before they can pay contributions to them. Participating employers may have to make super payments more frequently, such as monthly instead of quarterly.

For example, you need to make sure that you are meeting the super guarantee contributions now for all of your employees, including those who would have previously fallen under the $450 threshold.

Before 1 July 2022, employers who paid their workers $450 or more before tax in a calendar month had to pay superannuation on top of the employee’s wages. Now super must be paid on any payments you make to domestic or private workers if they work for you for more than 30 hours in a week, regardless of how much you pay them.

The minimum amount of superannuation that an employer must pay to their staff in Australia is called the superannuation guarantee (SG).

Under the superannuation guarantee, employers have to pay superannuation contributions of 11% (from 1 July 2023) of an employee’s ordinary time earnings when an employee is: over 18 years, or. under 18 years and works over 30 hours a week.

Currently, it must be paid at minimum four times per year, but from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages. This will be known as ‘payday super’, as more consistent contributions will mean that superannuation funds should be better able to increase their compounding potential.

Employers can claim a tax deduction for super payments they make for employees in the financial year they make them. Contributions are considered paid when the employee’s super fund receives them.

Missed payments may attract the SGC (superannuation guarantee charge). While the SGC is not tax-deductible, employers can use a late payment to reduce the charge or as a pre-payment of a future super contribution (for the same employee), which is tax-deductible

The Impact Of Compensations Payments On Your Super Payment

Compensation is usually paid out due to a work-related injury or illness, injuries received in a car accident or injuries received because of the negligence or fault of another person.

If a super contribution arises from a personal injury payment or a structured settlement (from a compensation payout), you may be able to exclude all or part of it from your non-concessional contributions cap.

This also means that no extra tax will apply to this contribution. It is only the part of the compensation that relates to personal injury that can be contributed to super.

Therefore, the court order or the agreement between parties must clearly state the payment breakdown. Compensation payments usually impact any Centrelink entitlements the member may be receiving. Any super balance unrelated to the compensation payment will also affect the member’s total super balance and transfer balance cap.

Generally, super contributions are of two types – concessional and non-concessional.

  • The concessional contributions cap is currently $27,500 per year (unless you can use the carry-forward rule).
  • The non-concessional cap is $110,000 per year (unless you are eligible to use the bring-forward rule)

There are annual caps (limits) on the amount of concessional and non-concessional contributions you can make. You’ll be liable to pay extra tax if you exceed these limits.

Three types of payments are eligible:

  1. Settlements of a claim for compensation or damages for personal injury suffered by the person and the claim is made by the person or their legal representative. The settlement must be by written agreement between the parties (whether or not a court order is required to make the agreement effective).
  2. Settlement of a claim for personal injury suffered by you under State or Commonwealth law concerning workers’ compensation.
  3. The payment arises from a court order following a claim for compensation or damages due to personal injury based on the commission of a wrong or right created by statute.

Once the payment satisfies the above criteria, the following three conditions must be met to make the super contribution:

  1. Two legally qualified medical practitioners certify that, because of the personal injury, it is unlikely the member can ever be “gainfully employed in a capacity for which they are reasonably qualified because of education, experience and training”
  2. The member (or their legal personal representative) notifies the super fund by completing a Contribution for personal injury form NAT 71162 when (or before) contributing.
  3. Contributing within the required time limit, usually within 90 days of whichever is the latter: receipt of payment, date of the court order or agreement made by the parties.

If you are unsure how your compensation payment may affect your contribution caps, consult your provider or a licensed professional as soon as possible.

1 July 2023 Brings Changes To Reporting For SMSFs

This month, the Transfer Balance Accounting Reporting (TBAR) regime has undergone changes that may significantly impact the timing that SMSFs report certain events.

From 1 July 2023, all SMSFs required to report transfer balance account events will be considered quarterly reporters. This will also capture all reportable events that may have occurred in the 2022/23 financial year. In effect, all reportable events from 1 July 2022 – 30 September 2023 will have a reporting date of 28 October 2023.

The old rules around this will not be grandfathered – any funds previously identified as annual reporters will now be quarterly reporters from 1 July 2023 will need to consider the new reporting date for any events that have, or will occur during this financial year.

Existing quarterly reporters will not receive an extension to lodge and will still need to report events from the 2022/23 financial year on a quarterly basis.

There will continue to be some instances where reporting must occur earlier:

  • Commutations resulting from a member voluntarily responding to an excess determination are to be reported within ten business days after the end of the month in which the event occurs.
  • Commutations required due to the receipt of a commutation authority from the ATO must be reported within 60 days of the authority being issued.

For those still having their financial accounts processed annually, this may require a rethink in dealing with their accountant/administrator. As these professionals often assist with lodging the Transfer Balance Account Reports (TBAR), they need to stay updated on any events in a more timely manner.

If you require assistance with the new TBAR reporting regime, it’s best to contact a licensed adviser or speak with us, as we may assist you with finding the right person to help.