With July 1 already past the calendar, some considerable changes in superannuation laws are being applied. Here’s how the new super changes can impact your super.
New measures have been set to address different issues; the most important among them is targeted at small super balances that have been eroded by excessive charges and fees.
Small balance fees
There are 21 million super accounts distributed among 15.6 million super fund members, which means that many among us possess funds we do not need.
Such additional accounts are still charging fees, and in some instances, careless members pay huge sums just to keep their super accounts active.
For small balance accounts, this can be quite overwhelming in part due to the yearly fees charged by the super funds, which are plane dollars that often signify a significant percentage of the entire savings.
Things are going to change though, as not super fund will be capable of charging more than 3 per cent over balances below $6,000 since July 1.
Exit fees imposed on members while they want to transfer their money into another fund shall be improved, in a rule designed to help members save $52 million per year.
Do you want insurance?
Another controversial change will ensure that insurance is being provided through super and being presented as “opt-in” for accounts that haven’t been active for sixteen months.
Until recently, all super accounts needed total-and-permanent disability (TPD) and death insurance with extra fees, and anybody who want out adhere to such condition with their super fund.
The new system
This new system reverses that process of requiring unnecessary fees for specific cohorts, although the CEO of the Association of Superannuation Funds of Australia, Martin Fahy, sees a huge problem with this new model.
Dr. Fahy told the News Daily that we must avoid the terrible situation where somebody who serves as a breadwinner is incapacitated of dies and leaves the dependent without support. That is terrible, indeed.
To do something about this problem, the ASFA devised a portal on its website called Time To Check that provides super members with information on what they should consider when opting for insurance.
Dr. Fahy said that the campaign is geared towards encouraging people to make informed decisions and think thoroughly of their personal situation.
So if you’re under any of these mentioned categories, you must think about your responsibilities and needs to those who depend on you.
Should you decide to maintain your insurance, then be sure to get in touch with your fund by June 30 and inform them.
Another scheme that targets small balance accounts by the Australian Taxation Office or ATO begins with cleaning up funds with investments below $6000 and haven’t been active for 16 months while paying minimum returns to the account’s owner.
If you have lost superannuation, the ATO goes to find lost super online – registered active fund – of the same owner and consolidate the previous funds into their active account.
The bottom line here is any funds you have will be consolidated into a single fund to minimize costs and fees.
Accounts that are incapable of automatic consolidation are submitted into a consolidated income until someone claims them, which means that irregular employees and seasonal workers who do not want the Australian Tax Office to suck in their savings must inform their super fund of their plans by June 30.
Changes for retirees
There are some new solutions to answer some of the concerns of retirees since July 1 and will provide them with more opportunities to make contributions. Pensioners can earn $50 or more in a fortnight, making a total of $300 and still maintain a full pension.
Also, retirees at the age range of 65 and 74 with super balances of lesser than $300,000 are allowed to make voluntary super contributions for the first year of retirement without going through a work test.
People under such category can contribute $25,000 in concessional or tax deductible payments or up to $300,000 in non-concessional (non-deductible) payments.
First home buyer’s tax-incentives
Qualified first home buyers are now capable of withdrawing superannuation contributions they have made since July 1, 2018 (up to a specific threshold) to prepare for their first home.
Under the Frist Home Superannuation Saver Scheme or FHSSS, first home buyers making voluntary contributions of at least $15,000 every year into their superannuation can withdraw such amounts (along with related earnings) from their superannuation fund to assist them with their first home deposit.
If qualified, the maximum contribution amount that is withdrawn under such scheme is $30,000 for individual members or $60,000 for couples (along with the associated earnings).
To be capable of withdrawing such money, first home buyers should apply to the Australian Taxation Office, and once qualified, a one-time withdrawal is allowed under such a scheme.
Because of superannuation’s good tax treatment, such an initiative, my aid first home buyers in building a savings deposit faster and increase their savings beyond superannuation.
Such reforms were created to safeguard the retirement savings of Australians by making sure their superannuation in not eroded unnecessarily by premiums and fees over insurance policies they don’t need.
If may be time to evaluate your superannuation and ensure that you know how these new changes can affect your superannuation account. It would also be a wise move to find unclaimed money Australia to see if you can consolidate them and save more money on unnecessary fees.