Superannuation Strategies 2016

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Thomson Reuters in their recent newsletter have published a checklist regarding superannuation strategies for 2016 financial year. We believe it provides a very useful reference tool for the coming year.

The new calendar year is a good time to conduct a superannuation health check and set some new goals to help boost superannuation savings. Although there have been no seismic shifts in the superannuation landscape of late, it may be prudent to reacquaint yourself with the rules. The following are some considerations:

  • Check your employer super contributions – for the 2015–2016 financial year, the super guarantee rate is 9.5%. You may want to check that your pay slips reflect this rate. The rate will stay at 9.5% until 1 July 2021, when it will start to gradually increase to 12% by 1 July 2025. Note that Norfolk Island has been brought into the superannuation guarantee fold. A transitional rate starting at 1% will apply from 1 July 2016 for the 2016–2017 financial year.
  • Monitor the concessional contributions caps – the general concessional contributions cap is $30,000 for the 2015–2016 financial year (the same as for 2014–2015). A higher concessional contributions cap of $35,000 applies for 2015–2016 for people aged 59 years or over on 30 June 2013. For the 2015–2016 financial year, this temporary concessional cap of $35,000 also applies for those aged 49 years or over on 30 June 2014 and for those aged 49 years or over on 30 June 2015. This temporary $35,000 concessional cap (not indexed) will cease when the general cap reaches $35,000 through indexation (expected to be 1 July 2018).
  • Monitor non-concessional contributions cap – this has increased to $180,000 (or $540,000 every three years for those under age 65) for the 2015–2016 financial year (same as for 2014–2015).
  • Consider salary sacrificing superannuation – if you make superannuation contributions through a salary sacrifice agreement, these contributions are taxed in the superannuation fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate. You may want to inquire about salary sacrificing superannuation or consider reviewing an existing arrangement with your employer.
  • Check the government co-contribution – a 50% matching applies whereby the Government will pay a co-contribution up to a maximum of $500 for a $1,000 eligible personal contribution for individuals with total incomes up to $35,454 for 2015–2016 (phasing down for incomes up to $50,454).
  • Check superannuation savings – check your superannuation balance regularly. In addition to getting to know your superannuation better, you may also want to protect your superannuation from identity crime. For example, you may want to change passwords for accounts that can be viewed online.
  • Look for small lost super accounts – the threshold below which small lost super accounts will be required to be transferred to the Commissioner of Taxation has increased. The account balance threshold has gone from $2,000 to $4,000 from 31 December 2015, and will go from $4,000 to $6,000 from 31 December 2016. You may want to consider identifying whether you have any small accounts that meet the threshold.
  • Consolidate multiple superannuation fund accounts – consider consolidating multiple superannuation fund accounts. This may help avoid paying multiple superannuation fund fees, reduce paper work, and make it easier to keep track of your superannuation. Keep all your statements in a safe place, especially if you need to maintain multiple accounts. There may be legitimate reasons for keeping multiple accounts. Now is the time to reassess those reasons and to contact your super fund if you need to keep the accounts active.
  • Think about life expectancy – people are generally healthier and living longer than previous generations. Retired men can expect to live to 86, retired women to 90. This means if you stop working at 60, you are likely to need retirement income for at least 26 to 30 years, if not more.
  • Check insurance and investment options – review insurance and investment options to see if they still meet your needs.