I UNDERSTAND the government was going to increase the amount of pre-tax contributions a person with limited super can make when they turn 50. I have just turned 50 and was wondering if the cap has been increased to apply from this financial year. The firm I work for contributes $800 a fortnight into my super and I salary sacrifice $200 a fortnight, making a total of $28,600 a year. My super balance is just over $300,000.
It was never going to increase them. At present, there is a government proposal to keep them at $50,000 for people with balances under $500,000 from July 1. As the laws now stand, you can contribute up to the $50,000 cap in concessional contributions until June 30 and this will reduce to $25,000 on July 1. This is not legislated yet so watch this space.
I am seeking advice regarding my super fund. I have become aware that when I pass away, my daughter, who inherits, will have to pay a sizeable chunk of tax as she is a non-dependant. One suggestion is that I roll it over into a bank account. The big question is should I move it or should I just sit with it as it is?
The main purpose of super is to provide for your retirement and save tax, so you will need to ask your adviser if you will pay much tax if you withdraw the bulk of the funds now. An important factor is your age, because if you are younger than 60, there could be tax on money withdrawn from super. If you are in a taxed fund and are older than 60, a better option may be to give an enduring power of attorney to a trusted person, with instructions to withdraw the funds tax-free and place them in your bank account if your health deteriorates.
My wife and I have a self-managed super fund in transition-to-retirement phase and would like to know the life cycle of a self-managed fund from now on. What are the maximum and minimum contributions, concessional and non-concessional, and the implications attached?
You cannot make contributions to a fund that is paying an account-based pension but you could make contributions to a separate account in either name in that fund. There are no special rules for self-managed funds.
I'm 21 and my dad passed away this year without leaving a will. I'm about to receive $70,000 from his share in his parents' house. Is this going to be taxed as a gift? I also have no idea what I should do with it once I have it. With everyone harping on about super, is it feasible for me to make a contribution or is it safer to put it in a high-interest savings account?
If the legacy is in cash, there should be no tax to pay. I wouldn't put it into super as you will lose access for nearly 40 years. My preferred option is to put it in a term deposit with a major bank, eventually using it as a house deposit. You could make a $1000 non-concessional super contribution to get the government co-contribution.
If someone is a carer and does not have a superannuation fund, can they open a personal fund and get a co-contribution from the government?
To be eligible for a government co-contribution, you must have income from paid work or your own business. Unfortunately, if you are solely an unpaid carer, you will not qualify.
I am 52, single and earn $2478 gross a fortnight. My super balance is $54,000. I pay $600 a fortnight off my home loan and have $153,000 left on my mortgage. I have one more year of child-support payments of $900 and have $1500 in savings. Am I best to put all I can into my mortgage or should I salary sacrifice what I can into superannuation?
At your age, I prefer the strategy of salary sacrificing because such contributions lose just 15 per cent, whereas money taken in hand for a person in your tax bracket loses 31.5 per cent.
I am 58, single and finding it difficult to find employment, so am considering retirement. I own my house and have $700,000 in term deposits, $380,000 in super and $60,000 in shares. Is this enough for me to be comfortable for the rest of my life? I would like to keep my money in term deposits and roll my super over into an allocated pension for a monthly income stream. Can I get any pension?
You should be taking advice, because money contributed to superannuation is not assessed by Centrelink until you reach pensionable age you might be eligible for Newstart if the bulk of your superannuation could be sheltered by this strategy. How long your money will last depends on the earnings rate, the state of your health, how much you withdraw and how long you live. A good rule of thumb is that you need 12 times your expected expenditure, so with financial assets of $1.14 million you should be able to spend $90,000 a year without your money running out. Your assets would preclude you from getting any age pension if you were 65 now.
Advice is general readers should seek their own professional advice.
Contact noel.whittaker@whittaker macnaught.com.au. Follow him on Twitter: @noelwhittaker. Questions to: Ask Noel, Money, GPO Box 2571, Qld, 4000, or see moneymanager.com.au/ask-an-expert.
Frequently Asked Questions about this Article…
Has the concessional superannuation contributions cap increased for people turning 50 this financial year?
No — there hasn’t been an increase. As the laws stand you can contribute up to a $50,000 concessional cap until June 30. From July 1 the cap is due to reduce to $25,000, although there is a government proposal to keep it at $50,000 for people with balances under $500,000. That proposal is not yet legislated, so watch this space and check with your adviser before making large pre-tax contributions.
Will my non-dependent daughter have to pay tax if she inherits my superannuation?
Possibly — a non-dependent who inherits super may face a sizeable tax bill on death benefits. The tax outcome depends on the type of fund and your age at the time of withdrawal. If you’re older than 60 and in a taxed fund there may be ways to get money out tax-free (for example, via an authorised person acting under an enduring power of attorney if health deteriorates), but you should get personalised advice to understand the tax implications before making changes.
Should I roll my super into a bank account to avoid tax for my inheritor?
Not automatically. The main purpose of super is retirement and tax efficiency, and whether moving funds out now triggers tax depends on your age and fund type — if you’re younger than 60 there could be tax on withdrawals. Rolling money into a bank account can remove it from the super environment but may create immediate tax or lost retirement benefits. Talk to your financial adviser about your age, tax position and estate plan before moving large sums.
Can I contribute to a self-managed super fund (SMSF) that is in transition-to-retirement phase?
You cannot make contributions to any fund that is paying an account‑based pension, but you can make contributions to a separate accumulation account within the same SMSF in either name. There are no special contribution rules that apply only to SMSFs — general contribution caps and rules still apply — so check caps and restrictions before contributing.
If I inherit $70,000 in cash from a relative, will it be taxed and should I put it into superannuation?
If the legacy is received in cash there should be no tax to pay. The article advises against putting a large inherited sum into super if you’re young because you could lose access for many decades — instead consider a term deposit with a major bank and/or use it as a house deposit. You could also make a small $1,000 non‑concessional contribution to super to qualify for the government co‑contribution if eligible.
Can an unpaid carer open a super fund and receive the government co-contribution?
No — to be eligible for the government co‑contribution you must have income from paid work or your own business. A person who is solely an unpaid carer does not qualify for the co‑contribution.
At age 52 should I pay down my mortgage or salary sacrifice into superannuation?
At that age the article’s advice favours salary sacrificing because concessional super contributions are taxed at 15%, whereas income taken in hand for someone in the described tax bracket would lose about 31.5% to tax. Your personal circumstances (interest rates, mortgage terms, cash flow and risk tolerance) matter, so discuss the trade-offs with your adviser.
I’m 58 with term deposits, super and shares — is my savings likely to be enough for retirement and will I get the age pension?
You should get personal advice. Key points from the article: how long money lasts depends on earnings, health, withdrawals and longevity; a rule of thumb is 12 times expected annual expenditure (so $1.14 million could support about $90,000 a year). Centrelink won’t assess super until you reach pensionable age, you might be eligible for Newstart in the meantime, and with the assets cited you would likely be precluded from the age pension if you were 65 now.
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