How to get more from super as you near retirement
The Government has proposed some radical changes to the superannuation industry and if implemented the majority of reforms will take affect from 1 July 2007. Proposed Budget changes that may affect people nearing retirement include:
Reasonable Benefit Limits will be abolished. The good news is that although the 15% contributions tax still applies, Reasonable Benefit Limits (RBLs) may cease to exist. That is, the limit on the amount of concessionally taxed superannuation you can receive throughout your lifetime has been removed. Retirees and those approaching retirement whose superannuation funds are over-funded will be able to relax. Their RBL problem may have disappeared . overnight! So you can continue to save towards your retirement.
The introduction of yearly caps on contribution levels that receive tax concessions: up to $50,000 a year in deductible contributions to your super fund and up to $150,000 for non-deductible contributions.
The aged based contribution levels will no longer apply. However, as the current maximum deductible level for people aged 50 and over is currently over $100,000 per annum, a transition period is proposed whereas persons aged 50 and over during the period 2007-08 to 2011-12 can have a maximum deductible contribution of $100,000 per annum.
Super benefits are tax free for people over age 60 whether lump sum or pension. People over the age of 60 will benefit from the removal of tax on both lump sum and pension benefits paid from a ?taxed' superannuation fund. Those considering retirement may consider delaying retirement until the next financial year 2007/2008 to take advantage of the new rules.
The abolition of compulsory cashing of superannuation on retirement has also been proposed. This means that you will be able to leave your benefits in the concessionally taxed superannuation environment without the need to commence an income stream or cash out as a lump sum once you retire. You will also be able to keep your money in the superannuation system regardless of whether you are working or retired. The age up to which you can make a tax-deductible contribution will be extended to 75.
Centrelink Assets Test taper rate. Also announced were substantial changes to the Centrelink Assets Test taper rate. Currently, a person loses $3 of age pension per fortnight for every $1,000 of assets above the Assets Test free threshold. As superannuation savings increase, as well as the value of other assessable assets, the number of people affected by the Assets Test is projected to grow with low to middle income earners having their age pension reduced by the Assets Test. To make the Assets Test fairer, from 20 September 2007, it is proposed to reduce the pension Assets Test taper rate to $1.50 per fortnight for every $1,000 of assets above the test free threshold.
These are just a few of the changes proposed by the Government, but there are many other changes. For further information on how these changes may impact you and your retirement planning, contact me on 07-3217 6044 or firstname.lastname@example.org to arrange a complimentary, obligation-free initial appointment.
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