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Superannuation Changes To Affect Pensioners (And What You May Still Need To Take Into Account From Last Year’s Budget)

The Federal Budget was released last Tuesday, announcing key changes to taxation and business. For superannuation, the minimum pension drawdown amount was in the spotlight.

The reduction in the minimum pension drawdown amount for superannuation pension recipients has been extended for another year by the Federal Government, as announced in the Budget for 2022-23.

The minimum pension amount will be only 50% of the general amount (the balance from which the pension is drawn). For example, a 65-year old would usually need to draw down 5% of their opening balance as a pension payment throughout the year.

For the 2022-23 financial year, the minimum amount will be reduced 50% (dropping this to 2.5%). This measure is set to cost the Federal Government around $19.2 million dollars for the 2022-23 years, but you need to be alert and conscientious about it.

Why Is That?

Whilst it is a great outcome to keep as much of your money in your super as is possible (if it’s not required for you to live on), you do need to be conscious that at some point, the remaining balance will be passed onto the next generation, potentially as a part of their inheritance.

When this money does change hands and is given to the next generation if the superannuation balance includes a taxable component, then your children may be subject to as much as 17% tax on the capital value of that balance.

Different tax treatments can apply depending on whether your super is being paid as a lump sum, income stream or mixture of both, and if your beneficiary or beneficiaries are classified as ‘tax dependants’.

A tax dependant includes:

If your beneficiaries were not financially dependent of you, such as a spouse or child under 18 years of age, then they will have to pay tax on the inheritance that you have left for them in your superannuation fund.

However, if you take that money out of your super and it passes to your children as a part of your estate instead, there will be no death duties payable (in this instance, ‘death duties’ refers to inheritance tax that may be payable, which has not been an issue since 1981).

The primary reason for the reduction in the minimum pension payment amount is to protect pensioners from having to sell their assets during a volatile period. However, this is a double-edged sword that needs to be carefully considered and weighed against your circumstances.

You May Need To Start A Discussion 

Superannuation can be a tricky area to navigate, especially when you’re trying to do it by yourself.

If you’re approaching retirement, you may have questions about how to prepare for your pension years. These may include

  1. General retirement adequacy – how much money you’ll actually need to retire on
  2. How to manage your finances in retirement
  3. Old age issues that could crop up
  4. Using your home to fund retirement and insurance (and embracing the grey nomad lifestyle)
  5. Recent changes to superannuation measures, including the extended timeframe of the minimum pension drawdown,

Consulting with a professional is the best way to ensure that your pension is currently operating at its most effective level, and they can assist you with understanding what you may need to do to get your affairs in preparation for the future.

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Super Guarantee Change – Deadlines, Payments & Everything Your Business Needs To Know Before The EOFY

Posted on May 23, 2022 by admin

It is easy to get caught out with superannuation, particularly when you are the owner of a business. With so many things to occupy your mind, superannuation may slip from the forefront.

But as a business owner, you must pay the superannuation guarantee for your staff, and you must pay it on time. A failure to pay it on time will mean that you are no longer able to receive a tax deduction for the payment for that financial year. 

On top of that, you can face hefty penalties (which you won’t get a tax deduction for either!). Now imagine being five days late on a $10,000 super payment, losing the tax deduction on that payment and then copping a $20,000 penalty as well. 

The first thing is to make sure that your super is paid well before the time it is due. This should be a priority payment (a payment that you make before anything else).

As the end of the financial year approaches, it is time to be thinking about the June Super Guarantee payment. You may have until July 28 to make the payment but leaving it until then will not net you a tax deduction until the next financial year. From a tax perspective, this may not be what you want to do (unless you know that in the next year, you will need more tax deductions).

Superannuation also has a few strange rules when it comes to claiming a tax deduction.  For employee superannuation, it is critical that it is paid on time.  More than that, the money has to actually be in the bank account of the super fund for you to claim a tax deduction.  

Unlike other expenses where you can show the money coming out of your bank account, this money needs to be present in your super fund for you to make the claim. If your super guarantee payment hits the bank account of the super fund on June 30th then you can claim a tax deduction for that year.  If, however, it hits the bank account on July 1st then the tax deduction is claimed in the financial year after.

Problems arise when you are paying your super through a clearing house, which takes a number of days to clear your payment and get it to the super fund. For example, you may pay the clearing house on the 25th of June, but your super fund does not receive it into their bank account until the 1st of July. 

The ATO’s Small Business Superannuation Clearing House usually has some concessions in these instances.

If you want to get a tax deduction for your June Super Guarantee payment, you need to work out with your clearing house the latest day that they can guarantee that the super fund will then receive the payment this financial year.  Some of these clearinghouses are quoting that you should be paying as early as the 14th of June.

Finally, with regards to Super Guarantee, remember that the rate increases to 10.5% from 1st July.  This rate applies to wages paid on or after July 1st so make sure your payroll system either automatically updates the rate or that you have updated it to reflect the increase.

Employers who fail to meet their Super Guarantee obligations may also be liable for a range of penalties or charges on top of the super guarantee charge. 

Paying super is an important part of being an employer. To ensure your business remains compliant, remember to: 

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