Changes to superannuation – do you need advice?
You may have already started to see a number of articles about BIG CHANGES TO SUPERANNUATION being published in emails, newspapers and blogs. I thought I would add to that list, but add a little bit of reality to it as well, and hopefully provide the answer of; Do you need advice?
What are the changes?
1. Increase in a number of the superannuation caps.
CPI increases over the last number of years have finally increased the concessional cap from $25,000 to $27,500 from 1 July 2021. So what is the concessional cap?
The concessional cap is the amount of money that you or your employer can contribute to superannuation and have it taxed concessionally (15% in super). This cap includes your employer contributions, salary sacrifice, and any amount you contribute personally and claim a tax deduction for. It is a cap that is monitored by the tax office, and therefore includes all of your superannuation funds if you have more than one.
If you contribute more than the cap, the tax on your contributions over the cap may not be treated concessionally and may add to your concessional cap.
1a. Indexation affects the Non-Concessional Cap
The non-concessional cap is 4 times the concessional cap, and will therefore be increasing to $110,000 from 1 July 2021. Non-concessional contributions are contributions that you put into superannuation with money that you have already paid tax on, such as savings, or the sale of an investment.
1b. Indexation effects the Superannuation Transfer Balance Cap
The Transfer Balance Cap is also affected by indexation. The Superannuation Transfer Balance Cap is rising to $1.7 million. This cap will only affect those that are close to retirement, and have large account balances in super. Your transfer balance cap is personal to you and details can be found on ATO online. If you superannuation balance has been over $1.6 million at any stage, then please seek advice about how this cap affects you personally.
2. An increase in your employer contributions
From July 1 2021, the current legislation dictates that your employer has to pay you an increased amount of superannuation. The amount is scheduled to increase from 9.5% of your wage to 10%.
The only proviso about this increase, is that we have a Federal Budget between now and 1 July, and the Coalition Government we responsible for postponing this increase in the past, and there have been whispers for sometime that it could be further postponed.
Do you need advice?
The above changes are all going to happen because of legislation. Unless you are close to utilising one or more of these caps you should not need to seek advice because of these changes.
However, if you need either product advice or life advice that involves your finances, then it would be in your best interests to seek out a financial adviser that you can work with. This can be a long term relationship, or merely a one-off.
As the name suggests, product advice is advice on financial products. Types of financial product range enormously from Superannuation, to shares, life insurance products and pensions. This kind of advice is very specific to the needs that you are after. It would generally compare 2 or more like products with recommendations for which is in your best interest and why. Some products can be set up so that they largely manage themselves, and other need regular input.
Life advice is different, as it involves working out what you current situation is, what your desired future situation is, and how to get there. It will almost always work out what you can save on a monthly basis, and the best use for that excess cash flow.
At Forwood Planning, we are not presricptive on the type of advice, nor the products that we recommend. If you would like to discuss your situation further please make a time by clicking here.