Taking action on your Super now just became so much more important, with lifetime caps and reduced annual contribution rates announced in the May budget potentially being legislated.

While the carefree days of your retirement may be decades away, what you do today can have enormous impacts on the savings you will have available for your retirement. For example, contributing an extra $100 in concessional contributions each week could create over $144,000 extra funds in your Superannuation savings when you retire[1]. And based on an annual salary of $100,000 with a tax rate of 37%, this could also represent a tax saving of approximately $1,250 pa.

The potential Superannuation changes announced in the May 2016 Federal Budget could dramatically affect the way Australians can build their Superannuation balances.
Perhaps the biggest issue to consider will be the impact of the introduction of a lifetime cap of $500,000 for additional non-concessional Super contributions. Currently an annual cap of $180,000 applies for additional after-tax contributions to Super (with a bring-forward rule which allows up to $540,000 to be contributed over a three year period for under 65’s). This lifetime limit will also potentially be backdated to 1 July 2007, further hampering your ability to build your Super balance through after-tax contributions.

For many people, additional after-tax contributions have been a strategy to build their Super balance as they move closer to retirement, using funds from investments outside of Super, inheritances or the sale of a business, property or assets.

Further, reductions on annual concessional or before-tax contribution rates for Super means making regular contributions (within contribution caps) over a longer term and getting the most out of your Super investment returns is imperative.

When you consider that the AFSA Retirement Standard recommends that a couple (aged over 65) will require $58,992 per year (or a minimum Superannuation balance of $645,000) to live a comfortable retirement,[2] it highlights the need to have a Superannuation strategy in place.

Currently less than 30% of Australian couples are reaching retirement with enough savings to achieve a comfortable standard of living in retirement.[3]

Further, spokesperson Ms Vamos from the AFSA Retirement Standard has predicted that saving an adequate amount for retirement is anticipated to get harder due to low interest rates and an ageing population placing more strain on governments funding the increasing costs of health and aged care.[4]

With the current age pension rates for a couple at $34,252 per year[5], it’s even more important to plan your independent retirement.

In coming months I will focus on the “Super Challenge” which is about encouraging you to get involved with your Super, to make the most of the savings you can have available at retirement.

If you have questions or concerns about your Superannuation or want to you make the most of your compounding returns, I invite you to contact me on (07) 3720 1299 or email admin@wealthfundamentals.com.au

[1] Figures based on starting Superannuation balance of $100,000 with $792 monthly employer contributions over 20 years (9.5% of $100,000 salary paid into Super monthly), + additional $433 monthly non-concessional contributions based on 6.2% interest rate.
[2] http://www.superannuation.asn.au/media-release-2-june-2016. These figures assume that retirees own their own home outright and are relatively healthy.
[3] http://www.superannuation.asn.au/media-release-2-june-2016
[4] http://www.superannuation.asn.au/media-release-2-june-2016
[5] http://www.superguide.com.au/accessing-superannuation/age-pension-rates

Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.

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