How The Budget Will Affect Your Super
The Budget has been completed and the election is over. Time to review what the budget changes mean for you in regards to your Superannuation.
If your take-home pay is under $37,000, your Super fund will get a tax discount of up to $500, which will minimize or even cancel out your Super tax bill.
The Superannuation threshold has decreased from $300,000 to $250,000 from July 2017. It will affect the tax payable on Super contributions.
The government will also reduce the annual cap on concessional Super contributions. The new cap will be $25,000 a year for everyone.
The loss of Superannuation tax concessions will affect very high earners, but overall this measure aims to make superannuation fairer.
Retirees will have a bit more choice with what they do with their superannuation once they retire. The Government plans to remove tax on earnings for some products during the retirement phase. You will start to see new financial products like deferred super annuities – which manage retirement incomes for their members – and they'll be more attractive to buy. It will also lessen the burden on the age pension, since these products are designed to prevent you from outliving your savings.
This is a very brief summary of the changes. The Government has provided a lot of information on the entire budget. I have provided the link here. http://budget.gov.au/2016-17/content/glossies/tax_super/html/
As a financial planner I can provide you a more comprehensive overview of your particular circumstances.
A new financial year - A new financial plan
The new financial year has arrived and it is an ideal time to review your financial situation and tweak a few things for the new financial year.
ASIC recently revealed that only two in five Australians have a short-term financial plan in place, and only a quarter of those surveyed have a long-term financial plan.
Here are a few steps you can take yourself to start planning for the future:
Keep track of what you spend – ASIC’s MoneySmart website have a great app – TrackMySpend App which can be used to track what you spend. It is free to use and can help see the big picture of where you can maybe cut costs in your spending etc.
- Stick to a budget - Once you have established what you are spending and on what, it will be easier for you to set a budget and stick to it. This is the first step in being able to save money or put money away for the future. Another great app that can help with this is MoneySmart’s Budget Planner
- Get your debts under control - It is important to get your debts under control before you can think about investing or saving. A credit card debt of $2000 could take you over 12 years to pay off if you only pay the minimum monthly payment. Consider paying higher amounts to minimize or eliminate these types of debts.
- Make the most of your Super -There are a few simple steps you can take to make the most of your super. We spoke about these in my last blog.
- Review your insurances – This includes all insurances, home, car, life and income insurance. Shop around, just ensure you are comparing apples with apples – sometimes the cheapest isn’t always the best.
Make the most of your Super
It is important to make the most of your super and keep up to date with different options and potential tax savings from the government etc.
Here are a few tips to ensure you are making the most of every cent.
- Consolidate your super into a single super fund. You can easily end up with more than one super account if you switch jobs regularly and employers pay into a different super account. You will save a lot on fees etc. by consolidating them into the one fund. It is super easy, just contact the fund to find out how.
- Keep a track of any “lost money”. This could be a super payment from a job 20 years ago for example. Worth a look through this link.
- Select your investment and insurance options smartly. Most funds offer life insurance, total and permanent disability cover and income protection. Firstly check that your super policy does offer these options. Generally, buying this insurance through your super fund can be cheaper and premiums are deducted from your super account.
- Contributing more to super fund is a “tax smart” option. Salary sacrificing can be a “tax smart” option as the money that goes into your account is taxed at 15% rather than your usual tax option.
- The Government Co-Contribution. If you earn less than $50,454 before tax, you may be eligible for a government co-contribution to your super if you make an after-tax contribution yourself. The government will contribute 50 cents for every dollar you contribute up to a maximum of $500. You can check how much you could receive with ASIC’s MoneySmart calculator.