Fees, Funds & Financial Investment – What To Look At When Changing Your Super Fund Provider

When you join the workforce, it’s likely that your superannuation fund was chosen for you by your employer. If you’ve kept that fund throughout your career and across the jobs that you have, you might not have put too much thought into how it’s performing. However, if you have and you find it lacking, here are some things that you can do.

When you are comparing super funds, you should weigh up how well the funds are performing against each other, and have done so over the previous five years. You should only compare funds that operate under the same investment options (ie. balanced versus balanced).

The kinds of fees you may pay should also be closely considered as a factor in choosing a fund to switch to. In this instance, you’ll want to be looking at how they are deducted, how low they are overall and what actions may incur a fee (such as switching investment options).

Examining the kinds of default insurance offered by the funds (life, total and permanent disability, and income protection) will provide you with an overview of what might offer you the better coverage. You should look at:

  • The premium rates,
  • The amount of cover, and
  • Any exclusions or definitions that might affect you.

Examining these factors will assist you in determining whether or not the fund is still right for your needs. If you have questions about your superannuation or want to discuss your options, you can speak directly with your super provider for more information.

How Much Super Should You Have To Retire?

Retirement might seem like a far off dream for many in the workforce, but it’s never too early to start thinking about how much money you might require to live comfortably in your golden years.

Your super balance will most likely fund your retirement, so knowing how well it is performing at your current age is a critical way to address performance issues and optimise its path going forward. You want to make sure you’ll be getting the most out of your super so that when it comes to retiring, you can afford the lifestyle you want.

The amount of super that you may need to live comfortably during your retirement may depend on a range of factors, such as expenses that you may incur, outstanding debts you may have and whether you will be eligible for other types and forms of income (such as through investments, savings, an inheritance or the Age Pension).

According to figures set out in March 2021, those who are looking to retire today (regarding individuals and couples around the age of 65) would need an annual budget of around $44,412 or $62,828 to fund a comfortable lifestyle. For a modest lifestyle, they would need an annual budget of $28,254 or $40,829 respectively.

Everyone’s situation is different, and their super balance will likely reflect those differences.

Men and women may have different super balances due to pay gaps, salary differences and potentially the amount of time they have actually spent working (maternity leave, working part-time versus full-time etc, taking time off work for travel, etc.). As an example, a woman in the 20-24 age bracket may have an average super balance of $8,051, while a man in the same bracket is expected to have an average balance of $9,481. In the 40-44 age bracket, the average super balance for men is $134,992, while women in that same age group may only possess $98,572.

So how can you make certain that your superannuation gets the boost it needs to fund your retirement? We can suggest the following:

  • Track down lost super to make sure that you’re not paying for multiple fees on different accounts.
  • Consider whether consolidating your funds might be a worthwhile option, to keep easier track of them.
  • Review your investment options (you may want to consider switching to a more growth-focused super investment option, for example).
  • Review your super at least once a year, and check the fund’s performance, fees that you are paying, what insurance you might have inside your super and if it is still suitable for your current needs.

If you’re looking towards your future, and want more advice on how to plan for your retirement with regard to your superannuation, you can speak with us or your super provider.

Do You Know What The New Superannuation Guarantee Rate Could Mean For You?

On 1 July 2021, the Superannuation Guarantee Rate for employees increased from 9.5% to 10% of their wage or salary. With this increase, more and more Australians are now examining what that could mean for their super’s long-term performance.

The superannuation guarantee, or SG, dictates the minimum percentage of your earnings that you need to pay into your employee’s super fund. This percentage is controlled and legislated by the Australian Government, and it is estimated that an additional $1.5 billion will be paid into the superannuation system over the next 12 months as a result of this

For most employees, this will mean an extra 0.5% added to their current salary plus super.  But where an employee is on a contract where their salary is superannuation inclusive it could be that they will receive a corresponding reduction in their salary to offset the extra superannuation.

Currently, one in seven Australian employees may have seen a reduction in their wages as a result of this(as evidenced in a recent study by CoreData). Employers and employees will need to have a discussion about how this will occur for them so that everyone knows the situation they will be in for this financial year.

The continued proposed increase to 12% is still scheduled to happen, with 0.5% increments occurring each financial year until the 2025-26 financial year (when the Superannuation Guarantee Rate will peak at 12%).  It might not seem like much, but with the added power of compound interest, singles may see an increase of up to $19,000 more in their superannuation accounts, and couples up to $38,000.

The rates applicable to each financial year are proposed to be:

  • 1 July 2021 to 30 June 2022                 10%
  • 1 July 2022 to 30 June 2023                 10.5%
  • 1 July 2023 to 30 June 2024                 11%
  • 1 July 2024 to 30 June 2025                 11.5%
  • 1 July 2025 onwards                             12%

The rate of change for the Superannuation Guarantee Rate had remained at 9.5% since 2014 and had only previously increased twice (in 2013 and 2014 respectively).

If the government decides to delay the increases to the super guarantee (as it has done in the past) you will be kept informed regarding that information. You can also speak with us if you are uncertain about what this could mean for your business, or need to make changes to current super payments.

Why Should You Be Making Voluntary Contributions To Your Super?

When it comes to retirement, you want to ensure that your super is performing at its most optimal level when it comes to accruing funds.

Your super is probably going to be a primary income source for you during your retirement – that’s why it’s something that you want to ensure is performing optimally, and accruing funds regularly.

You can assist in this process by making voluntary contributions. Making an extra contribution of as little as $20 per week for over 30 years could end up doubling what might otherwise be a $30,000 contribution through compound interest.

If you choose to contribute voluntarily to your super, you need to be aware of the difference between non-concessional and concessional contributions. Non-concessional contributions cover the payments that your employer makes on your behalf from your after-tax income, whereas concessional contributions can include salary sacrificing and personal deductible contributions.

If you are looking for a way to increase your super, you can opt-in to sacrifice some of your salary (often recommended to those with high or stable income) to your super as a voluntary contribution. Essentially, you dedicate a little more of your pay to your super, reducing what you pocket from that time period.

You can speak with us to find out whether or not salary sacrificing could be of use to or suit your situation specifically.

You can also make personal deductible contributions if you are self-employed or a retiree, of up to $27,500 per year in concessional super contributions.

Choosing to make voluntary contributions to your super can be the difference between having your super fund perform, and having it perform well. If you’d like to know more about options for your superannuation, you can speak with us to find out what you can do for your particular situation.

Why Should You Use A Corporate Trustee Instead of Individuals For A Family Trust?

A family trust is a great structure.  It provides tax flexibility whilst giving you asset separation in two directions.  But what does asset separation in two directions mean? And why might we suggest it to you as a recommendation?

First of all, why do you want asset separation? If there are multiple assets, you want to make sure that if someone makes a claim against the owner of a particular asset that your other assets can be quarantined from that claim. This isolation will mean that they can’t gain access to the assets that are yours and separate from the claim.

If you own a business and have a successful financial claim made against your business where the claim is for an amount that is more than the assets of the business, you will first need to use the business to cover the claim, and then find something additional to supplement the shortfall. In this case, if you also own your own home, and its worth is enough to cover that shortfall, it may be used to meet the claim by combining the business assets’ worth and the family home’s value. You could lose your family home!

However, if we structure your business in a particular way then the person making that claim will only have access to the assets in the business and you will be able to keep your family home.

This is what is called asset separation. Generally, it’s a good thing to employ, but it does have one flaw – it usually only goes one way.

If someone claims on your business, they won’t get the house but if they successfully make a financial claim against you, they will successfully get all of the assets that you own, including those of your business.  This is a risk that you must be willing to take if you own a business.

When you operate a business through a family trust instead of owning that business, you will merely “control” it, and have but a “mere expectancy” of being considered in the distribution of any profits or capital from that business.

The good part here is that although you only have a mere expectancy to be considered, we would set it up so it is YOU that “considers” who gets the money.  This means that if someone makes a claim against you then they can’t get access to assets in the family trust. What this does is give you two-way asset protection.

There is a bit of an issue with family trusts though – although you will see the debts of the trust as debts of the trust at law, they are in actual fact the debts of the trustee. If you are the trustee, all of the debts of the trust are your personal debts. You can use the trust assets to pay down those debts, but if the trust assets are insufficient to pay the debts, it will be up to you to pay off the rest.

When you’re an individual trustee of a trust, you lose the perk of asset separation, which is why a company may be used as a trustee, as the company does nothing other than act as the trustee of the trust. If there are insufficient funds in the trust to cover the debts of the trust, then those debts fall on the trustee and the creditors have no access to your personal assets because you have no individual debts owing.

Want to know more about asset separation? Interested in trusts? We’re here to help.

There Are Only A Few Reasons That Your Superannuation Can Be Accessed Early – Here’s What They Are

Last year, a number of Australians took advantage of the early access to their super that was a part of the financial support options offered by the government during COVID-19, and withdrew amounts to assist themselves. If individuals and sole traders had suffered financial hardship of at least 20 per cent due to loss of work or hours, they were able to access up to $10,000 from their retirement savings in the 2019-20 financial year. They were also able to access a further $10,000 during the second round of the scheme from 1 July 2020 – 31 December 2020.

This scheme is now closed, and Australians can now only access the funds within their superannuation fund under certain circumstances.

Access On Compassionate Grounds

Compassionate grounds will include needing money to pay for:

  • Medical treatment and medical transport for you or your dependant
  • Palliative care for you or your dependant
  • Making a payment on a home loan or council rates so you don’t lose your home
  • Accommodating a disability for you or your dependant
  • Expenses associated with the death, funeral or burial of your dependant

Access Due To Severe Financial Hardship

This is not a grounds that is administered by the ATO but rather by your super provider who must be contacted to request access to your super due to severe financial hardship.

You may be able to withdraw some of your super if you meet both these conditions:

  • You have received eligible government income support payments continuously for 26 weeks
  • You are not able to meet your reasonable and immediate family living expenses.

You can withdraw between $1,000 and $10,000, but only once in any 12 month period.

Access Due To A Terminal Medical Condition

A terminal medical condition may allow you to access your super if these conditions are met that proves its existence:

  • Two registered medical practitioners have certified, jointly or separately, that you suffer from an illness that is likely to result in death within 24 months of signing the certificate
  • At least one of the registered medical practitioners is a specialist practising in an area related to your illness or injury
  • The 24 month certification period has not ended

Access Due To Temporary Incapacity

If you are temporarily unable to work or need to work fewer hours because of mental health or physical condition, you may be able to access your super. This condition of release is generally used to access insurance benefits linked to your super account. Super payments will be received on a regular basis over the time that you are unable to work.

Access Due To Permanent Incapacity

Access in this instance is sometimes called a disability super benefit, and access to your super through this method generally occurs if you are permanently incapacitated. You must have a permanent physical or mental medical condition that is likely to stop you from ever working again in a job you were qualified to do by education, training or experience.

It can be received as either a lump sum or as regular payments (income stream)

Super Less Than $200

In the instance where your employment is terminated and the balance of your super account is less than $200, or you have found a “lost super” account with a balance less than $200, you may be able to access your super.

First Home Super Saver Scheme

Applying for the release of voluntary concessional and voluntary non-concessional contributions that you have made to your super fund since 1 July 2017 to help save for your first home is a valid reason for the early release of super.

You will have to meet eligibility requirements to apply for the release of these amounts. Under the First Home Super Saver Scheme, you can apply for a release of a maximum of $15,000 of your voluntary contributions from any one financial year, up to a total of $30,000 (but this amount is due to increase to $50,000 following an announcement in the May 2021 budget).

Your Future, Your Super – What Does This Mean For Your Superannuation?

There has been a shakeup within the superannuation industry after the latest government reform passed through the Senate. You may have heard of Your Future, Your Super, which was introduced during the Federal Budget announcements of 2020-21, and wh

Your Future, Your Super was introduced during the Federal Budget 2020-21 announcements as a reform measure to address growing concerns about the performance of the superannuation industry.

Under the reform, superannuation funds will now face an annual performance test, public ranking by the Tax Office and the loss of an easy source of new members.

One of the most notable changes that have been introduced (as of 1 November 2021) is that Australians will no longer be required to fill out paperwork to avoid getting a new super fund when they switch jobs.

This measure has been designed to reduce the prevalence of unintended multiple superannuation accounts. The onus will be on the employer to check with the ATO if their employee has an existing super account, known as a ‘stapled super fund’, to pay the employee’s super guarantee into.

Super funds will also be subjected to a new annual performance test run by the Australian Prudential Regulation Authority (APRA), and underperforming products (those who show returns below 50 points ) will be labelled as underperformers. If your super is sitting in a dud fund and your nest egg is in an underperforming product, the trustees will be required to notify you within 28 days. Funds that fail the test twice in a row could be blocked from taking on new members.

Worried about how your superannuation fund may be performing, and not sure who to ask? Come have a chat with us.

Recent Changes To Your Superannuation That You Need To Know

There were a few changes to superannuation that were passed by the Senate recently.

You can now use the bring-forward rule to make three years’ worth of non-concessional contributions (where you don’t claim a tax deduction) up until the age of 67.

Last year the rules had changed to permit a person to make non-concessional contributions up to the age of 67 but the use of the bring-forward rule had stayed at an age limit of 65 years old, as it required a full Bill to be passed by both Houses of Parliament.

This new age limit will apply to contributions made on or after the 1st July 2020.  This is particularly good news for people that turned 67 during the year and utilised the three year bring forward rule in anticipation of the law being passed.

From the first quarter after receiving royal assent (most likely to occur from 1st July), Self Managed Superannuation Funds will be allowed to have up to six members.  The limit is currently four members. For larger families, this will be of particular use and relevance, as the parents involved in the fund may wish to include more than two children (this could potentially be up to four children involved in this case).

Pauline Hanson’s One Nation Party also passed through an amendment into the changes that will remove a charge on excess concessional contributions. Concessional contributions are those where you or your employer can claim a tax deduction on a contribution.

If you or your employer currently contribute over the allowable caps (usually limited to $25,000 but moving to $27,500 on 1 July) to your super, you are charged an amount of around 3% of the excess you contributed and it is calculated from the 1st of July in the year that you made the contribution up until the day your assessment is due.

There are still other charges that will apply to exceeding contribution allowable caps, such as Shortfall Interest Charge and General Interest Charge. The biggest is usually the Excess Concessional Contributions Charge.

This change was never announced and was not part of government policy but made it through anyway.  One Nation also tried to increase the maximum allowable tax-deductible contributions for persons aged over 67 years old, but that amendment did not go through.

Another change that had not been previously announced was that if you had an amount released from super under the Covid Relief package ($10,000 per year for two years) then you will not be able to claim a tax deduction for the same amount that you contribute back into super up until 2030.

For example, Peter took his $20,000 under the Covid Release package.  Peter contributes $1,000 per month into his superannuation fund and usually claims a tax deduction for that amount.

The first $20,000 that Peter contributes after 1st July 2021 will not be able to be claimed as a tax deduction. This only applies to personal contributions, so if your employer contributes on your behalf this will not impact you.

Want more information about super contributions, but not sure where to start? Come speak with us – we can help you with any questions you may have about superannuation.

1 July 2021 Will See Super Guarantee Rate Rise

Many years ago Julia Gillard’s government announced increases in the Superannuation Guarantee rate from 9% at the time, up to 12%.  The impact of the Global Financial Crisis has led subsequent governments to continually postpone these increases. So far, Australia has only received two increases, back in 2013 and 2014, when the superannuation rate went up to 9.5% over two years.  It has remained at 9.5% since 2014.

 

Now it is time for the next increase. This will happen on 1 July 2021 when the rate of superannuation that you have to pay for most of your employees will be 10% of their salary or wage instead of the current 9.5%.

 

For most employers that are using payroll software, this change will happen automatically. You should however confirm with your software provider (either directly or through someone like us) that this will happen to ensure that you remain compliant without needing further action.

 

For most employees, this will mean an extra 0.5% added to their current salary plus super.  But where an employee is on a contract where their salary is superannuation inclusive it could be that they will receive a corresponding reduction in their salary to offset the extra superannuation.  Employers and employees will need to have a discussion about this so that everyone knows the situation they will be in for the new financial year.

 

The proposed increase to 12% is still scheduled to happen in 0.5% increments each financial year until the 2025-26 year when the Superannuation Guarantee rate will peak at 12%.  The rates applicable to each financial year are proposed to be:

 

           1 July 2021 to 30 June 2022                 10%

           1 July 2022 to 30 June 2023                 10.5%

           1 July 2023 to 30 June 2024                 11%

           1 July 2024 to 30 June 2025                 11.5%

           1 July 2025 onwards                             12%

 

It is also possible that the government will delay the increases as it has done in the past, but you will be kept informed regarding that information. 

High School Students, It’s Time To Get Creative About Tax & Super

The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.

Working as a part of a team or individually, students are invited to write, make or film an entry for their topic:

* Junior (Year 7–9) are asked to highlight the value of tax or super (or both) in the community

* Senior (Year 10–12) must discuss your first job and what you need to know about tax and super.

Shortlisted entries in 2019 included raps, songs, animations, video skits and even a board game. If you’re a high school student interested in competing this year or are the parent of one, this resource is a great way to see how people have gotten involved previously (and that you can draw inspiration from as well).

The competition opened on 24 May, but entries will be accepted until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos who is one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.

Tax Office Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.

“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.

You can watch Sally explain how to get involved on ATOtv.

Winners of the 2021 Tax, Super + You competition will be announced in September.

Looking for more information about the 2021 Tax, Super + You competition? Visit www.taxsuperandyou.gov.au/competition to find out more details.