The proportion of Australian taxpayers adopting a set-and-forget approach to superannuation remains too high, and today’s dawn of the new financial year an opportune time to change this, according to Andrew Yee, director, superannuation, with HLB Mann Judd Sydney.
As the 2019/20 financial year takes effect, Mr Yee said super should be viewed as a major asset of a person’s financial circumstances and treated like other aspects of a budgeting framework.
“Depending on their stage of life, the level of importance may be different, but nevertheless, attention to super needs to be had, even in the early accumulator stage.
“Too many people still adopt a set and forget approach, especially younger people just starting out in their careers, as retirement for them is a long way off and it’s not money they can readily access. There absolutely needs to be a shift in attitude otherwise they’re unknowingly missing out on potentially thousands of dollars come retirement,” he said.
From today, individuals aged 65 to 74 years with total superannuation balances below $300,000 can make voluntary contributions to their superannuation for 12 months from the end of the financial year in which they last met the work test. This will leave open the door for people over age 65 and not working to make a final contribution towards their retirement.
Mr Yee said taxpayers also need to be aware of legislation already effective but that could only be taken advantage of from now.
“From 1 July 2018, taxpayers can roll forward any unused concessional contributions cap for five years (after which they expire). If they don’t use the full amount of the $25,000 concessional contributions cap in 2018/2019, they can carry-forward the unused amount and take advantage of it up to five years later, provided their total super balance is less than $500,000 on 30 June of the previous financial year.
“The first financial year where you can access unused concessional contributions is from now, the 2019/2020 financial year. Such a change requires additional monitoring of super contributions and may add to administration costs,” he said.
Mr Yee said while the approach to managing and structuring super hasn’t changed, the introduction of any new legislation warrants close attention.
“The focus historically has to be put as much into super as you can and then be in a position to draw-down on the nest egg in retirement. This is still the case – contribute as much as you can afford to, using salary sacrifice and personal concessional contributions. However, taxpayers need to be fully aware of how much they can contribute, the amount one can have in pension phase, and any super balance caps which may impact on their retirement savings,” he said.
While there are no major changes for self-managed superannuation funds in 2019/20, trustees and administrators of SMSFs paying pensions need to continue to ensure they are complying with the Transfer Balance Account Reporting regime.
Earlier this year, a Senate Economics Legislation Committee flagged the prospect of increasing the maximum number of SMSF trustees from four to six, with the Coalition thus far electing against taking the Bill further.
“Such a move would provide more flexibility for SMSFs, especially around the family unit, albeit more members typically result in more complexity and administration for trustees which means higher compliance costs. It’s very much a watch this space in terms of whether its enacted and how the legislation is structured,” he said.
HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.