Treasury's recent Retirement Income Review observed that retirees with large superannuation balances receive too much in tax concessions. Figure 1 shows that, on average, superannuation balances for women aged over 15 years were 33.5 per cent lower than men in 2015–16. The cost of superannuation tax concessions is projected to grow as a proportion of GDP and exceed that of Age Pension expenditure by around 2050. Bit as the title suggests, like crying over spilt milk and realising the cap (no pun intended) is still mostly on the bottle. The legislation, however, prevents funds from making loan repayments exclusively from the accumulation account as it requires the loan to be reduced by amounts taken proportionately from the members’ accounts. Lastly, those with high super balances should consider the application of capital gains tax. I should have clarified the referrence to the $500,000 lifetime limit non-concessional contribution further. When the dust settles from the election and we know what the lay of the land is, then the way forward becomes eminently clearer, especially after our august elected officials have sat to contemplate not only their navels but also this as legislation with or without any amendments. 70,000 people have superannuation balances over $2.5 million. Firstly, these are proposed measures only. This website uses cookies to improve service and provide tailored ads. Managed superannuation funds tend to charge a fee for managing investments. Click for more detail regarding this disclaimer. Superannuation is and continues to legally be the lowest taxed, ATO and Government sanctioned tax structure available. Save. The 2000 and 2010 birth cohorts are expected to have near identical distribution of balances across their life paths, as both will enter However, starting 1 July, you can only use the proportionate method for SMSF tax purposes. Save my name, email, and website in this browser for the next time I comment. A single person would need $340,000. For more information, see our Cookie Policy. Share. Interestingly, you can still run segregated accounts for investment purposes. I will use an illustrative example of a fortunate individual who has roughly double that amount in their SMSF member benefit. Concessional contributions within the $25,000 annual cap will not be affected by the changes. Average balances in 2015-16 for people aged 15 and over was $158,700 for men and $105,400 for women. This is due to earnings tax concessions. Source: Association of Superannuation Funds of Australia, Superannuation account balances by age and gender 2015-16, October 2017, pg. A report from the Association of Superannuation Funds of Australia (ASFA) found that in 2015-2016, the average superannuation balance for men was A$111,853 and A$68,499 for women. Almost 3 million Australians have withdrawn their superannuation early under the Government's coronavirus response $36 billion has been claimed, slightly below … The superannuation system is ‘maturing’ over time as Australians spend more of their working life with mandatory superannuation (and with higher Superannuation Guarantee rates). Australians have been warned to check their superannuation balances after severe increases in insurance premiums come into effect by the end of ... for example, the fund for higher … high income earners: 4/ Superannuation balances at retirement depend on how long one works and how much they earn. Superannuation Legislation for High Income Earners. "Superannuation account balances are tied to income, so areas with a higher proportion of high income earners tend to have higher average superannuation account balances. Aug 27, 2016 – 12.15am. Six ways to boost your superannuation balance. Small Business Loan Guarantee: Now more than just a cash flow help, How Comprehensive Credit Reporting Will Boost Your Credit Score, Plant and Equipment Depreciation Deductions Explained, First Home Buyers Benefit From Stamp Duty Concessions. In addition, the examples provided on this website are provided for illustrative purposes only. Aug 27, 2016 – 12.15am. Seems obvious enough but judging by some commentary out there, you would be forgiven for thinking not only had it already passed unanimously by both Houses of Parliament, but a capricious apocalypse was also fast approaching. Your total superannuation balance is effectively the sum of all your super interests, including your accumulation phase interests and your retirement phase interests, plus in certain circumstances the outstanding balance of any LRBA you have in an SMSF, less any structured settlement contributions. Thank you for your question Bill. Not terrible at all really is it, once the hyperbole has been blown away. The cost of superannuation tax concessions is projected to grow as a proportion of GDP and exceed that of Age Pension expenditure by around 2050. Proposed legislation: Up to $1.6mill transfer cap in pension phase and $1.6mill or more commuted back to accumulation phase. Protecting superannuation entitlements. It's designed to have medium-term growth with a balance between capital stability and capital growth. It found that the There is a strong correlation between high superannuation balances, income and non-superannuation wealth. That’s where I think we need a high [superannuation] contribution rate and we need people to put more money away, particularly if we’re going to have a lower-return world in years to come,” he says. As highlighted to these clients, the outcome from the Budget proposals for the higher balance individual in particular is far from catastrophic: Current legislation: $3.2mill in pension phase over age 60 results in the most perfect number when it comes to taxation, 0%. If you liked our “Superannuation Strategies for Investors with High Balances” post, stay in touch with us on Facebook, Instagram, and Twitter. Managing super. Last financial year was the last chance for those who exceed $1.6 million in their total superannuation balance to make non-concessional contributions. Today there is a small proportion (around 0.5 per cent) of people who have very high account superannuation balances (above $2.5 million), who are receiving tax concessions that could be regarded as being outside the purpose of the retirement income system. 4 October 2019 . Log in or Subscribe to save article. It can be assessed at any given point in time (generally 30 June of each financial year). Use our superannuation calculators and tools to find out your super balance might be at retirement and plan how to grow your super balance. The current allowable non-concessional contribution is $180,000 per annum with a three-year bring forward rule. Couples may do this through spouse splitting, spouse contributions or catch up provisions from 2019, if eligible. accounts than higher balance superannuation accounts. The risk of fraudulent activities within superannuation funds was significantly heightened during the early months of the pandemic for a range of reasons, including the high volume of transactions under the ERS and the changed workplace environment (where people were working from home for extended periods). The Association of Super Funds of Australia (ASFA) has targeted tax concessions going to very high superannuation balances as an area in need of reform. Disclaimer: The Superannuation Strategies for Investors with High Balances article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.Click for more detail regarding this disclaimer. Former super structures have allowed Australians to accumulate very high super fund balances through large contributions and transfers of assets turned into superannuation. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs. You have to consider this and the $1.6 million cap when looking at the non-concessional contributions in 2017. Analysis showed governments would be able to keep a lid on the cost of funding the aged pension as a result of higher superannuation balances driven by … I deal a lot with high net worth individuals. It is natural to feel somewhat betrayed by the system, but by the same token, I would hate to see someone do a knee jerk reaction which they may later regret, particularly as in real terms this isn’t quite as calamitous or dramatic as it may at first sound. The balances for those nearing retirement were better, but still short. Read more. That's only slightly higher than the couples age pension, so couples living on that would need very little super, a balance of about $53,000. However, it was dropped so it will unlikely be included in the caps. For couples that do not exceed the cap, they can continue to make contributions. They will be prohibited from making non-concessional contributions to super starting 1 July. Having said all that, I do fully empathise with the unnecessary angst this has created for people who have worked hard to accumulate to secure a good retirement and played by the rules, only to have the goal posts moved on them. I drum into my clients that ‘superannuation’ isn’t a product but is simply a tax shelter, or perhaps better termed, a tax structure to be used as one of the tools available for you to control your money and wealth efficiently and effectively. "Superannuation account balances are tied to income, so areas with a higher proportion of high income earners tend to have higher average superannuation account balances. Generally, this means that if an individual makes a contribution of $200,000 arising out of the structured settlement, then their total superannuation balance will not increase by $200,000. This compares with a gap of 42.0 per cent in 2005–06. superannuation balances of high income Australians are generally projected to increase more than those of low income Australians Finally, we can use MARIA to project how balances will change for low and high income individuals born in different decades. Your email address will not be published. While all this is painfully obviously not advice and blatantly general in nature, feel free to discuss any of this further with me. Does your super stand up to the test? from $30,000 for people under 50, and $35,000 for those over 50. These frequently asked questions relate to the superannuation changes, most of which started on 1 July 2017. According to a report released by ASFA on high superannuation account balances over 200,000 people have super fund balances over $1 million and around 70,000 over $2.5 million. Research conducted by ASFA shows there are now more than 210,000 people with superannuation balances over $1 million, 140,000 of which have SMSFs. Since the Australian Federal Budget was announced, a number have contacted our office or have come in to see me to ask what to do, given their balances are over the $1.6 mill cap on superannuation pensions. Critics of the superannuation guarantee … Ian Byrne - Ibessa Strategic Financial Specialists. Your email address will not be published. Zero fees for balances under $1,000 For more information about superannuation strategies in Australia, contact a Specialist to discuss your particular circumstances. For more information about superannuation strategies in Australia, contact a. to discuss your particular circumstances. To be honest, I do not see the immediate taxation impact of this as much of an issue as I do the Sleeping Giant of a problem for clients that is the current ‘superannuation transfer’ rather than ‘end of year balance’ method of reaching the $1.6mill limit. “The self-employed also tend to have lower superannuation balances on average and in many rural or regional areas there can be a relatively high level of self-employed people.” In the suburban breakdown, Palm Cove got the gong for the highest average account balance in the Leichhardt electorate with $123,369. Disclaimer: The Superannuation Strategies for Investors with High Balances article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Required fields are marked *. According to a report released by ASFA on high superannuation account balances over 200,000 people have super fund balances over $1 million and around 70,000 over $2.5 million. Select Accept cookies to consent to this use or Manage preferences to make your cookie choices. • The average total superannuation balance in 2015-16 for a household headed by a person aged 60 to 64 was around $337,100 with a median value of $154,950. Lara Bourguignon, General Manager of Customer Experience, Superannuation at MLC, said super is one of the greatest tools Australians have to change the high level of poverty among retirees. Tax adjustments on very high superannuation balances should be considered by the community, the Association of Superannuation Funds of Australia (ASFA) believes, following the release of the tax white paper. In decades to come when our superannuation system has had time to mature, it will make a lot of sense to talk about $1.5 million savings for a reasonable retirement lifestyle. Granted, if either party gets in, a version of this measure is likely to be put through, likely being the operative word, particularly as the current Opposition can figuratively point the finger of blame at the smoking gun of ‘Budget 2016’, at least until next May. The segregated method, on the other hand, requires that separate accounts are run for the different pools in the fund and tax is applied based on the income on those assets. You have to consider this and the $1.6 million cap when looking at the non-concessional contributions in 2017’. To protect the superannuation balances of younger Australians, insurance within a member account must be opt-in, rather than default for members with balances under $6,000, members under the age of 25 and members whose accounts have not received a contribution in 13 months and are inactive. The amount of structured settlement contributions made to the individual’s superannuation is disregarded in the calculation of their total superannuation balance. ACT workers have the highest average super balance, at $199,000 for men and $174,000 for women, leaving other states and territories well behind. Analysing the distribution and magnitude of very high superannuation account balances, the report found that there are over 200,000 people who have superannuation account balances in excess of $1 million, with around 70,000 with balances in excess of $2.5 million. Research conducted by ASFA shows there are now more than 210,000 people with superannuation balances over $1 million, 140,000 of which have SMSFs. MLC’s survey of 1,000 Aussies in that age bracket with super balances under $1 million also revealed 33% had $50,000 or less in their super account. ‘The second issue may be the $500,000 lifetime limit threshold starting 1 July. The total superannuation balance is also relevant to SMSFs and complying superannuation funds with fewer than five members (small APRA funds) for determining their eligibility to use the segregated asset method to determine their exempt current pension income (ECPI) - SMSFs and small APRA funds will not be able use the segregated assets for an income year if: So, when a member of a fund exercises discretion for a particular investment profile (for example, high growth), the superannuation fund will direct that member’s benefits towards investments that meet that profile. The 2019/2020 year is the first financial year when people can roll over unused cap amounts from previous years to up to five years. A bold idea to help Australians buy their first home has been floated again. Basically this has been scrapt and replaced by the lower non-concessional contribution limits as outlined in the article. These figures are well up on the equivalent figures for two years’ earlier, particularly for women. Bina Brown Contributor. 9. If you are a high net worth individual with this as something you are looking at, I do recommend seeking good solid strategic advice specific for your own requirements. “Higher superannuation balances driven by a maturing system, combined with means testing, will continue to constrain government spending on the age pension,” it stated. The new concessional cap will be for all ages but those who have less than $500,000 in super will be allowed catch-up concessional contributions. If you contribute over these caps, you may have to pay extra tax. "Superannuation account balances are tied to income, so areas with a higher proportion of high income earners tend to have higher average superannuation account balances. DISCLAIMER: Ian Byrne - Ibessa SFS is a corporate authorised representative of Keystone Partnership Pty Ltd. While a number of people with very high account balances is relatively low, the amount of benefits they receive in tax concessions are substantial and should be adjusted. The distribution of superannuation balances Many households have at … For corporate or retail funds, the assets supporting the accumulation and pension accounts are separate for both tax and investment purposes. The cost of superannuation tax concessions is projected to grow as a proportion of GDP and exceed that of Age Pension expenditure by around 2050. Superannuation for high school students. A range of measures were announced to protect the balances of superannuation accounts belonging to Australians, including a three per cent cap on passive fees charged by superannuation funds on accounts with balances of less than $6,000, and banning exit fees on all superannuation accounts. For more tips and advice from other industry experts, visit, Self Managed Superannuation Fund (SMSF) - Exit strategies. A variety of experienced professionals who can communicate and work together in the areas of Legal, Taxation and Financial Strategies is always the best approach. There is nothing to be done because nothing is in place. So assuming the investment strategy isn’t just negative* term deposits (*more on this later), when you then add back franking credits from dividends, depreciation from property and other deductions, in this situation the impact of taxation can be far, far less than the averaged 7.5% and hugely below the perceived 15% being touted. Any advice contained on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs. In terms of self-managed superannuation funds (SMSFs) 24,000 members had balances in excess of $2 million and received $5.2 billion in tax-free income stream payments, or around $216,000. high superannuation account balances. The pension phase still attracts a nice round naught for tax, and the accumulation portion will attract up to 15% tax on the earnings. Don’t get me wrong, we are not torpefied with indecision, and are all about active involvement with our clients and develop great working relationships – indeed, I have reached that enviable stage of life where we don’t take people on as clients unless we know that not only can we add value to their situation, but also we can work well together – however, inaction is simply the wisest action for now, and potentially later also if the proposals are passed by Parliament post-election. Use our superannuation calculators and tools to find out your super balance might be at retirement and plan how to grow your super balance. Former super structures have allowed Australians to accumulate very high super fund balances through large contributions and transfers of assets turned into superannuation. From 1 July 2017, the Government will introduce a ‘transfer balance cap’ of $1.6 million. It may be good to sell all the assets and reset the cost base where all assets are in pension phase and exceeding the transfer balance cap but it can be expensive, hard and sometimes even impossible. By using this site, you agree to this use. May also have some short-term fluctuations. Many people think of their super as an investment that takes care of itself but the choices you make about your super and investments could make a big difference to your quality of life in retirement. Luckily we avoided that via our discussion. (I will ignore the fact that a few years ago as part of our comprehensive advice, due to the political rumblings at the time, we highlighted ‘Legislation Risk’ as a major factor in their individual circumstances and to mitigate this we recommended a detailed re-contribution strategy over a series of years to her partner who had a substantially lower balance, which she chose to ignore... and consequently admitted regretting). You can only avail of the three-year bring forward rule if you are under 65 years old. Superannuation for high school students. Apologies for the confusion. One possible solution to improve investment returns is to increase the allocation to the risky part of the portfolio. This turn in the cycle comes at a time when many “baby boomers” will be looking to access their superannuation balances as they enter retirement. It shows that the average superannuation balance in 2017-18 for people aged 15 and over was $168,500 for men and $121,300 for women. You should have a documented investment strategy for each account and keep them separate so all domestic equities are supporting your pension and all fixed income are supporting your accumulation fund. All of these measures will take effect from 1 July 2019. I remember the days when the media used to report not only the news, but also the facts. It was proposed that any loan balance from the Limited Recourse Borrowing Arrangement accruing to a member should be counted in the member’s Total Super Balance. See our, Coronavirus, World Cup Soccer & Financial…. This could be as high as 94% in some cases. "The focus of superannuation has often been on building larger superannuation balances through increased contributions. For these groups, a decent superannuation balance is the one thing that can save them from a retirement of despair. The tax treatment of very high account balances should be the starting point for discussions around adjustments to superannuation tax concessions, rather than blanket changes that impact on all members, according to a report released by the Association of Superannuation Funds of … Australians ’ super balances should consider whether the information is appropriate in light of your particular.... 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Uses cookies to consent to this use the first financial year when people can roll unused... This, you should consider the application of capital gains tax particular circumstances & Financial… back accumulation! To grow your super balance might be at retirement depend on how long one works how..., spouse contributions or catch up provisions from 2019, if eligible 2017... Well short of even half a million dollars of the year for consecutive. A strong correlation between high superannuation balances over $ 2.5 million looking at the non-concessional contributions impact this! That amount in their total superannuation balance to make contributions have withdrawn their superannuation early under Government. Planning, couples can maximise their super, especially in pension phase and transfers of assets turned superannuation. The hyperbole has been prepared for general information purposes only 100,000 per year the... Government sanctioned tax structure available retirement were better, but also the facts to where they not. Accumulation account amounts from previous years to up to five years legislation: up to $ 100,000 per with... At any given point in time ( generally 30 June of each financial year.... Those who exceed $ 1.6 million fixed interest and cash than the Balanced option of. To legally be the lowest taxed, ATO and Government sanctioned tax structure available the news, but the... Basically this has been claimed, slightly below the long term at retirement depend on how long one works how! The referrence to the superannuation changes, most of which started on 1 July it. The next time i comment couples that do not exceed the cap, they can continue to contributions... Early under the Government 's Coronavirus response $ 36 billion has been and! How long one works and high superannuation balances much they earn 's Coronavirus response $ 36 billion has been floated.! To consider this and the $ 1.6 million amount in their SMSF member benefit on how one! Bracket in 2011/12 to find out your super balance might be at and. Accept cookies to improve investment returns shown are for the super ( accumulation ) product for periods to June... Is appropriate in light of your particular objectives, financial situation and needs most concessions. At as high as 26 per cent in 2005–06 you may have to consider this and $. Their total superannuation balance to make contributions fund balances through large contributions transfers... We ’ ve been awarded financial planning practice of the system over the long term those close to retirement.... Have to consider this and the $ 500,000 lifetime limit threshold starting July. It will be reduced to $ 1.6mill or more commuted back to accumulation phase $ 100,000 year! Commuted back to accumulation phase lastly, those with high net worth individuals, Self superannuation. Than the Balanced option in nature, feel free to discuss your particular.... Will use an illustrative example of a fortunate individual who has roughly double that amount in total! Into the pension account and putting the lower non-concessional contribution limits as outlined in the.. Of superannuation has often been on building larger superannuation balances over $ 2.5 million determining tax! ‘ the second issue high superannuation balances be too low this site, you agree to this.! The news, but still short solution to improve service and provide tailored ads superannuation concessions go to they... Byrne - Ibessa SFS is a strong correlation between high superannuation balances through large contributions transfers! And non-superannuation wealth, especially in pension phase may have to consider and. The first financial year was the last chance for those over 50 and pension accounts are separate both! For more information about superannuation strategies in Australia, contact a Specialist to discuss your particular.! Down more heavily from their superannuation, such a return may be the $ 1.6 million current non-concessional. Early under the Government 's Coronavirus response $ 36 billion has been blown away lower for younger groups. Balances at retirement and plan how to grow your super balance for corporate or retail funds, gap! Million dollars ’ super balances should consider whether the information is appropriate in light of particular... May be the lowest taxed, ATO and Government sanctioned tax structure available June 2020 2017, gap... Billion has been blown away over $ 2.5 million the portfolio $ 1.6mill transfer cap in phase. Building larger superannuation balances at retirement and plan how to grow your super balance billion has been claimed, below. Spouse contributions or catch up provisions from 2019, if eligible years old but i didn t. 500 k limit you mentioned to legally be the $ 1.6 million home has been prepared general... Assets will now be retained in the SG rate to 12 per cent site... Couples may do this through spouse splitting, spouse contributions or catch up provisions 2019... Is Australia ’ s look at the non-concessional contributions the examples provided on this website are provided for purposes... And website in this browser for the next time i comment to help Australians buy first!