Superannuation

The Australian Securities and Investments Commission (ASIC) publishes target lump sums for 'modest' and 'comfortable' retirement lifestyles through its Moneysmart retirement planner. Both targets are reviewed regularly, so the current figures are best checked on Moneysmart at the time of planning. As a guide, a single person aiming for a comfortable retirement at 65 needs meaningfully more than someone aiming for a modest one, and couples need more than singles.

A personalised retirement plan gives a sharper target than any benchmark figure can, because it accounts for your actual expenses, assets, life expectancy and Age Pension eligibility.

If you change jobs regularly, you may find that you have multiple super fund accounts. When you leave your job for a new position somewhere else, you can:

• •Leave your super invested in the fund currently owned and arrange your employer to forward super payments to this
• •Rollover your money from your existing superannuation fund to your new one

Consolidating can make it easier to manage and monitor one fund instead of multiple funds, and will save management and investment fees. Whether you stay in one job all your life or change jobs regularly, managing your superannuation is essential to maximise its long-term benefits.

Super is designed to fund your retirement cash flow needs, and therefore the preserved funds are not accessible until you turn 65 or reach preservation age and retire. However, there are certain circumstances that may enable you to take your preserved funds out of your super:

• •Severe financial hardship
• •Disability
• •Reaching preservation age (see the Transition to Retirement page for the preservation age table)
• •Via a Transition to Retirement strategy

SMSFs have been a popular way to take control of superannuation investments and make better use of the money. However, there are pros and cons. Running an SMSF is like running a business and requires the same focus to be effective and compliant.

Things to be aware of and some of the associated costs:

• •Become the Trustee of the fund (individual or corporate entity) and make all decisions regarding investments
• •Formulate an investment strategy and review it regularly
• •Understand the restrictions regarding investment types an SMSF can make
• •Fund the setup and licencing of the fund via existing super funds available
• •Pay for independent audits of the fund annually
• •Keep the fund legally compliant, otherwise fines to the trustees can be significant
• •Prepare the SMSF annual tax return, valuations of assets, and actuarial certificates for SMSFs paying pensions
• •Attain the services of a financial adviser and pay ongoing legal and administration fees

We can assist in the management of an SMSF so you can focus on what is important to you. We will also advise whether an SMSF is the right strategy for you. Learn more on our SMSF Administration page.

In most cases, yes. Superannuation in Australia is generally taxed in three stages: contributions, investment returns and benefit payments.

As an employee, you can contribute up to the concessional contributions cap (currently $30,000 per year and indexed annually). This includes your employer's Super Guarantee contribution, which has now reached its legislated maximum of 12 per cent of ordinary time earnings. Concessional contributions are taxed at 15 per cent inside the fund, which is lower than most marginal income tax rates. If you are self-employed, you can claim a tax deduction for personal contributions until you reach age 75.

Certain exceptions to consider:

• •If you earn under $37,000, tax will be reimbursed into your super fund via the low-income super tax offset
• •If your income and super contributions together sum over $250,000, you must also pay Division 293 tax at 15%
• •If you make non-concessional contributions from after-tax income, you are not required to pay contributions tax

Investment income generated by super funds is also taxed at 15% (interest and dividends, minus tax deductions and credits).

The amount of tax you pay on superannuation withdrawal varies according to whether it is in the form of a super income stream, lump sum or super death benefit.