Is your super better after budget 2020
Is your super better after budget 2020
Gov is introducing “stapled funds”
1. Your super fund will be “stapled” to you and your employer will be required to contribute to this fund.
2. From 1st July 2022, your employer will be able to access info of your super account to contribute to via ATO site to avoid duplication.
3. Super choice is still the best option
4. The default fund is to be used only if employee does not have current super and has not chosen a fund.
5. Please make sure that you research super funds and make an informed decision. Very rarely I would ever recommend accepting a default fund as they tend to be generic, with not many features you might need, and not with a great investment choices.
Introduction of “stapled funds” will allow for reduction of unintended multiple accounts, with duplication of fees, insurance, and consequently lost earnings
Introduction of a new gov website MySuper
1. Introduction of new gov website –MySuper – designed to introduce more visibility and relative performance
2. Super funds will be required to report the underperformance – subject to annual performance test
3. If super fund fails in 2 consecutive years, will not be permitted to accept new members, unless performance improves.
4. Requirement for trustees to act in the best financial interest of members
5. I don’t really know how that has been calculated, but apparently those measures are expected to improve a typical Australian retirement fund by around $60,000 over the life of the fund.
This idea is still subject to debate – so watch this space.
In relation to the YourSuper calculator, the danger is that members really needs to understand the super as an entity and be able to compare like for like.
This calculator is not comparing fees, does not take into account your particular needs such as insurance for example or any specialist investments you might want to have included in your portfolio.
Gov reconfirmed previously announced COVI-19 response package, which was:
1. Temporary access to super – 2x $10K last financial year and this financial year till 31 December 2020. – so please remember it is only till the end of the calendar year and not financial year.
2. Temporary 50% reduction to minimum pension drawdowns to account -based pensions and market linked pensions for last financial year and current financial year.
3. So no new benefits have been added here.
Positives of the budget for superannuation environment:
1. No messing or fiddling with superannuation – unlike speculations prior
2. $30bil in expenses coming out of the superannuation – so any way to reduce those expenses for the benefit of members is beneficial
3. Introducing trustee responsibility to act for the best financial interest of members is positive, I am just a little stunned that this is not a given part of trustee responsibility and has to be separately legislated, but hey, maybe I imagine a perfect world. I just hope trustees will not see this as an excuse to increase their trustee fees in order to implement those measures in your super
4. 80% of Australians are disengaged from their money – most people don’t do budget, don’t check their super, don’t check fees and charges, don’t choose investment portfolio- so introduction of the calculator might make people take more action and be more engaged.
5. I don’t disagree with naming and shaming underperforming super funds as the system is designed to let consumers know if their fund is performing and if it is worth staying with it, but it is taking into account only one consideration, which is performance. As explained before there are many other factors why particular super fund might be good for you, and judgement on the performance front is not a fair one. But it will also drive the competition, hopefully creating a better outcome for consumers
6. Simplifying the process of super when applying for a new job,
7. It is disappointing to see that the planned increase of SG has not been confirmed
- Current 9.5% in 2020-21
- Was supposed to increase to 10% om 2021-22 – this is another huge hit especially for low income earners.
8. There is nothing in the budget to reduce the superannuation gender gap created by wage equity, and the time off work women take for the family.
9. What’s worse, most part-time jobs are filled with women earning up to that new 19% tax threshold income of $45,000.
And this is when, as promised, I want to explain the issue of the low-income superannuation tax offset
Before the threshold was $37,000 and with that level of income, employer super contributions that were subject to 15% contribution tax, were effectively paying higher tax than your income tax rate.
In order to fix this issue, the government introduced the low-income superannuation tax offset (LISTO) of up to$500.
However now, that the 19% tax rate has been increased to $45,000 all tax payers with income between $37,000 and $45,000 will effectively pay more tax via employer SG than they would have if money was paid as income, because the low-income superannuation tax offset LISTO stopped at $37,000, as per prior legislation.
Again, considering that we have over 705,000 women being affected by this, is just not adequate.
Self-funded retires and part-funded retirees would be very disappointed with this budget – nothing in it for them.
If you would like to read about the Budget’s impact on PENSION & AGED CARE – click here
If you would like to read about the Budget’s impact on YOUR TAX – click here
Say Hi on Social
13 Financial Mistakes We All Make
Katherine has been a lifesaver for my Husband and I.
My Aged Care Avatar! Katherine has aided me both emotionally and financially.
Katherine Isbrandt has been my Financial Advisor for nearly 16 years..
For me, the nickname I gave her back then of ‘Wonder Woman ‘ still stands!
More Great Read
12 Principles of Investing
A tiny request: if you liked this article, please share it
Most people don’t share articles, thinking that one share will not make a difference, but believe when I say, each article takes hours of putting it together, and I create them as I really want to make a difference in people’s lives.
So thank you so much for your support. Not only you will seriously help this blog to grow, but more importantly you will help people who might need this information and advice.
Some great suggestions how you can share it:
- Pin it!
- Share it on Facebook
- Tweet it
- Email to your friends and colleagues
It won’t take any more than 10 sec, as I’ve created all share buttons here for your convenience
Just pick your favourite button from the left side of this post, write your note and it’s done. THANK YOU
Investing for Income and Growth in Retirement Investing for Income and Growth in Retirement Did you know that unlike 20 years ago, today over-55s account for more that 19% of the workforce. This number is expected to grow to about 40% by 2050 according to the Centre...
What Happens to Your Super When You Die What Happens to Your Super When You Die For most Australians, superannuation is the second biggest asset we have. It is one of the most used forms of savings for the future, but our super money is sitting in one of the most...
Downsizer Contributions to super – Who can benefit Downsizer Contributions to super– Who can benefit Last week we were discussing the Downsizer Contribution, what type of contribution that is, how it works and what are the rules that you have to meet to be eligible to...