Superannuation can become more complicated as your balance grows and retirement gets closer. You may have questions about how much you can contribute, when you can access your money, whether you should combine multiple super funds, or how tax could affect your retirement savings.
Understanding these rules can help you make more informed decisions about your super. It can also help you avoid mistakes that could affect your retirement income, insurance cover or tax position.
From contribution limits and accessing super after 60 to paying off your mortgage and planning for superannuation after death, there are several important areas to understand. Here are some of the common superannuation questions and the key information you need to know.
How Much Can You Contribute to Super? #
There are different contribution limits for different types of super contributions. Knowing which limits apply to you is important, especially if you receive an inheritance, sell an investment property or have a large amount of savings outside super.
Non-Concessional Contributions
Non-concessional contributions are generally made from money that has already been taxed. These may include personal savings that you decide to put into your super fund.
The annual non-concessional contribution limit discussed in the source material is $130,000. Eligible people may also be able to use the bring-forward arrangement, which can allow up to three years of the annual limit to be brought forward. Based on this figure, this could allow up to $390,000 to be contributed under the three-year arrangement, depending on your circumstances and the rules that apply.
Concessional Contributions
Concessional contributions are generally made before tax. Employer contributions and salary sacrifice contributions can fall into this category. The concessional contribution limit discussed in the source material is $32,500.
Additional concessional contributions may help reduce your taxable income if you are eligible. However, contributions are generally taxed within your super fund, so you should consider both the possible tax benefit and the tax paid on the contribution.
When Can You Access Your Super? #
Superannuation is generally designed to support you in retirement, so you cannot usually withdraw your savings whenever you choose. You need to meet a condition of release before you can access your super as a lump sum or pension.
The rules can depend on your age, employment situation and whether you have retired. For people aged 60 and over, certain changes to employment may allow access to super under the relevant conditions of release.
Once you reach age 65, you can generally access your super regardless of whether you are still working. Understanding these age and employment rules can help you plan when to access your super and how much you may need for retirement.
Can Super Contributions Help Reduce Tax on an Investment Property Sale? #
Selling an investment property can result in a significant capital gain, which may increase your taxable income for the financial year. Before estimating the tax impact, review the property’s cost base and eligible expenses that may reduce the capital gain. Keeping records of renovations, improvements and other eligible costs can be important when preparing to sell.
A tax-deductible super contribution does not directly reduce the capital gain from selling a property. Instead, if you are eligible to claim the deduction, it may reduce your overall taxable income for the year.
This may be useful when a property sale creates a large capital gain or when you also receive higher employment income. However, concessional contributions are generally taxed within your super fund, and contribution limits apply.
Should You Combine Multiple Super Funds? #
Having more than one super fund is common after changing jobs. Keeping several accounts can make your retirement savings harder to manage and may mean you are paying fees across multiple funds.
Before combining your super, check the insurance attached to each account. Different funds may offer death cover, income protection and total and permanent disability insurance. Moving your money could mean losing insurance cover, and replacing it later may be harder or more expensive.
You should also compare fees, investment options and other benefits before deciding which fund to keep. Consolidating your super may make it easier to manage, but it is important to check what you could lose before moving your money.
Can You Combine Two Account-Based Pensions? #
Having more than one account-based pension can create another consolidation question. Two pensions with different providers cannot simply be merged into an existing pension account. One approach is to establish a new pension and transfer the relevant amounts into it.
Older pension products may have special rules or protections that need to be considered. For example, some arrangements may have protections that affect Centrelink treatment.
For this reason, pension consolidation should not be based only on convenience. Check the possible effects before closing an existing pension and moving the money.
Can You Put an Inheritance Into Super? #
An inheritance can provide an opportunity to strengthen your financial position. The source material states that an inheritance itself is not a taxable event, but putting inherited money into super means you must follow the relevant contribution rules.
Before contributing a large inheritance to super, check the applicable contribution limits. You should also consider when you may need the money and whether keeping some of it outside super would be more suitable for your financial needs.
Can Salary Sacrifice Help Build Your Super?
Salary sacrifice allows you to have part of your salary paid into super instead of receiving it as cash. This can help you build your retirement savings while potentially reducing your taxable income.
However, salary sacrifice should still leave you with enough money to cover your everyday expenses. Keep track of your total concessional contributions so you do not exceed the applicable limit.
Are Your Financial Adviser Fees Worth the Cost? #
Financial advice can be useful when planning for retirement, but it is reasonable to review whether you are receiving enough value for the fees you pay. Adviser fees can add up over time, especially when you are already drawing an income from super.
An adviser may help with retirement planning, Centrelink entitlements, investment decisions, tax matters and inheritance planning. If the advice helps you make better decisions and understand your financial position, the fees may provide value.
If your needs have changed or the advice is no longer useful, it may be worth reviewing the arrangement. The key question is whether the service you receive justifies the cost.
Should You Use Super to Pay Off Your Mortgage? #
Paying off your home loan before retirement can reduce your regular expenses. However, using a large part of your super to clear the mortgage could also leave you with less money to support your retirement.
For example, someone with $1 million in super and a $500,000 mortgage may consider withdrawing $500,000 to clear the loan. While becoming mortgage-free can be appealing, taking half of your super out at once would significantly reduce your retirement savings.
There is no single answer for everyone. Consider your mortgage balance, interest costs, super balance, income, investment returns and expected retirement expenses. A partial withdrawal or continuing to work and contribute to super may be options worth considering.
How Much Super Do You Need to Retire? #
There is no single super balance that will provide a comfortable retirement for everyone. The amount you need can depend on your lifestyle, housing costs, debts, other assets and income sources.
Your retirement plans also matter. Travelling regularly, enjoying hobbies, helping family members or maintaining a higher standard of living may require more retirement income.
Your super should therefore be considered alongside your home, savings, investments, debts and other income sources. Looking at your overall financial position can give you a clearer idea of whether you are on track for the retirement you want.
Is There a Death Tax on Super? #
The term “death tax” is sometimes used when discussing tax on super paid to certain beneficiaries. However, it is not a separate tax officially called a death tax. Tax may apply to the taxable component of your super when it is paid to certain beneficiaries, including adult children.
Super also has specific rules about beneficiaries and how your money is paid after death. This is different from simply leaving assets through a will.
Can a Re-Contribution Strategy Reduce Tax?
A re-contribution strategy may help change the tax components of your super balance. It generally involves withdrawing money from super and contributing it back as an after-tax contribution. This can increase the tax-free component and may reduce the tax payable by certain beneficiaries in the future.
Contribution caps and other rules apply. If you have a large super balance, the strategy may take several years to complete. It can be particularly relevant when planning to leave super to adult children or other beneficiaries.
Can You Put Property Sale Proceeds Into Super? #
Selling a second property can provide a significant amount of money for investment or retirement planning. Putting some of the proceeds into super may offer tax advantages compared with some investments outside super, but the money will also be subject to super access rules.
If you are still several years away from retirement, consider keeping enough money outside super for living costs and other financial needs. The bring-forward arrangement may also help eligible people contribute a larger amount as a non-concessional contribution.
However, using the bring-forward arrangement can affect your ability to make further non-concessional contributions during the relevant period. Contribution limits, eligibility and timing should be checked before making a large contribution.
Can You Move Money From an SMSF to Another Super Fund? #
Moving money from a self-managed super fund to another super fund is known as a rollover. Unlike a withdrawal, a rollover keeps the money within the superannuation system.
The SMSF’s accounts and records need to be properly prepared before the transfer. The fund’s accountant may need to finalise the accounts up to the transfer date and prepare the required rollover documents.
Once the required paperwork is completed, the money can be transferred to the receiving super fund.
What Should You Consider Before Making a Super Decision? #
Superannuation decisions can affect your finances for many years. Before making a large contribution, check the relevant contribution limits. If you are combining funds, review your insurance and other benefits before moving your money.
Tax, debt and retirement income should also be considered together. Paying off a mortgage may reduce your expenses, while keeping more super invested may provide more money for your later years.
Final Thoughts #
Superannuation can raise many questions as you approach retirement or experience a major change in your finances. Whether you are making a large contribution, accessing super after 60, combining funds, managing debt or planning for beneficiaries, understanding the rules can help you make better decisions.
Your age, income, super balance, debts, investments, family situation and retirement goals can all affect your choices. Before making a major decision, check the current rules and consider getting advice based on your personal circumstances.
