Personal Insurance Advice Perth

When you reach your preservation age and retire, you can access your super to fund your retirement.

You can also access your super:

• when you turn 65 years old
• under the transition to retirement rules (if you are eligible), while you continue to work.

You don’t have to cash out your super just because you’ve reached a certain age, however, you need to check if the rules of your particular super fund specify otherwise.

Your preservation age is not the same as your pension age. Your preservation age is the age you must reach before you can access your super and depends on when you were born.

The tax payable on super benefits depends on a number of things, including:

• your age
• the amount of the payment
• whether you receive your super benefits as a super income stream or a super lump sum
• whether your super comes from a taxed or untaxed source.

Some super benefits have a tax-free component and a taxable component. The tax-free component generally includes:

• amounts you have contributed to your super fund without claiming those amounts as a tax deduction
• certain other tax-free amounts you may have rolled into your super fund.

ASFA estimates that the lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.

ASFA estimates that a modest lifestyle, which covers the basics, is mostly met by the Age Pension. They estimate the lump sum needed to support a modest lifestyle for a single or couple is $70,000.

However, this might not be enough for you, it is important to seek advice on this with a Financial Planner, the team at OakView Financial can sit down with you and work out your required balance to meet your retirement needs.

Non-concessional contributions have the advantage of zero tax on the money deposited into your super. The earnings will be taxed at the rate of 15% like the rest of your superannuation and will be tax-free upon retirement. There are caps to how much you can contribute each year and there is also a bring-forward arrangement you can utilise.

• 3 times the annual non-concessional contributions cap over 3 years (that is, $330,000) if your total super balance on 30 June of the previous financial year is less than $1.48 million
• 2 times the annual cap over 2 years (that is, $220,000) if your total super balance on 30 June of the previous financial year is above $1.48 million and less than $1.59 million
• nil ($0) if your total super balance is $1.59 million or above.

These limits are based on the:

• non-concessional contribution cap of $110,000
• total super balance in relation to the general transfer balance cap of $1.7 million.

To qualify for the full or partial Age Pension you need to meet the Income and Asset tests limits:

Income Test – you and your partner’s income from all sources are assessed. This includes financial assets such as superannuation. To work out how much income your financial assets produce, the Government use deeming. Pensions have income and asset limits. If you’re over these limits, you get a lower pension.

Asset Test – all asset types are assessed as part of the assets test. How much you are paid depends on the value of your assets and if you’re in a relationship. There are limits on your total assets and the Department of Social Services reviews these limits twice a year.

Your assets include any property or possessions you own in full, in part, or have an interest in. This includes:

• assets held outside Australia
• debts owed to you.

To be eligible for Age Pension you must be Age Pension age and meet some other rules.

On 1 July 2021, Age Pension age increased to 66 years and 6 months for people born from 1 July 1955 to 31 December 1956, inclusive.

If your birthdate is on or after 1 January 1957, you’ll have to wait until you turn 67. This will be the Age Pension age from 1 July 2023.

The Department of Social Services reviews the eligibility for the Age Pension each year, increasing the upper limits to scale with inflation. Australian Parliament may also introduce policy changes to the limits, it is best to review your retirement strategy with your Financial Planner each year to ensure you are always taking advantage of the best outcome.