The Better Super reforms have created a whole new ball game for retirement planning. In the past, much of the focus in retirement planning was on tax-free thresholds and Reasonable Benefit Limits (RBLs) on retirement because these limited the amount of concessionally taxed super you could receive over your lifetime.

The reforms have made these issues less relevant but how much tax you pay along the way has also fundamentally changed. All benefits you receive from a taxed super fund will be completely tax free after the age of 60. Earnings on your investments in super are also taxed at a maximum rate of 15% (compared to a possibly higher rate outside of super, depending on your circumstances). To take advantage of the favourable tax treatment of super, you might want to begin sacrificing some of your salary or increasing the amount you already salary sacrifice.

The reforms may also influence the age at which you plan to retire. As noted above, all benefits will be completely tax free if taken after you turn 60. If you retire between the ages of 55 and 59, some of your benefits will be subject to taxation. And, if you retire before you turn 55, the amount of tax you will pay on your benefits will be higher. If you are nearing retirement you should seek guidance from your Fund. We can assist you and provide access to a financial planner who can explore with you a host of strategies that may be applied to maximise your benefits and reduce your tax bill. And remember that it does not matter when you intend to retire, it’s always better to plan well in advance to ensure you take advantage of all possible options that relate to your personal circumstances.

Contact our friendly Member Services team on 1800 067 059 who can help you determine if you should be talking to one of our financial planners sooner rather than later.

In the past, the size of concessional contributions you or your employer could make to your super at the concessional rate of 15% was limited by your age. Now there are no age based limits. In fact, you are now allowed to make concessional contributions to super until you turn 75. However, the Superannuation Guarantee only applies up until age 70.

From 1 July 2007, any concessional contributions you or your employer make up to $50,000* a year will be taxed at 15%. Any amount over $50,000 will be taxed at an additional 30% plus the Medicare levy.

If you turn 50 between 1 July 2007 and 30 June 2012, you may benefit from transitional arrangements which allow you to make concessional contributions of up to $100,000 a year at the 15% tax rate each financial year until 2012.

* This amount is indexed to Average Weekly Ordinary Time Earnings (AWOTE) but will only increase in $5,000 increments.

From 1 July 2007, non-concessional contributions to super will be limited to $150,000** a year if you are:

	64 years old or younger; or
	65 years to 74 years old and satisfy the work test (that you work for 40 hours during a consecutive 30 day period each year a contribution is made).

If you are younger than 65, you can also bring forward these contributions out to a limit of $450,000 over three years. For example, a person under age 65 can make up to $450,000 of contributions in the 2007-08 financial year, but would not then be able to make further non-concessional contributions until the 2010-11 financial year. Any contributions made within the limit will not attract tax when withdrawn from super. Contributions above the limit will be taxed at the top marginal tax rate plus the Medicare levy.

Self-employed persons will be able to claim the Government Co-contribution for any eligible non-concessional contributions made.

** This amount will be linked and capped at 3 times the concessional contribution limit.

If you don’t provide your TFN to the Fund between now and 30 June 2008, all your concessional contributions will be taxed at the top marginal tax rate, plus the Medicare levy, if they exceed $1,000. For accounts that begin after 1 July 2007, the $1,000 threshold does not apply. Furthermore, your Fund will not be able to accept any non-concessional contributions from you if they don’t have your TFN.

For this reason, it is crucial that you provide your TFN to the Fund, either directly or through your employer, as soon as possible (if you haven’t already done so). You should also check your Member Benefit Statement to ensure that your TFN is correctly recorded.

Age Pension changes

If you don’t currently qualify for an Age Pension, this could change as a result of adjustments made to the Asset Test Exemption and the Age Pension Asset Test Taper Rate.

From 20 September 2007, the Age Pension Asset Test Taper Rate will be halved so that pension recipients only lose $1.50 per fortnight (single and couple combined) for every $1,000 of assets above the relevant threshold.

In addition, the Assets Test Exemption for purchased ‘complying’ income streams will be removed for income streams purchased on or after 20 September 2007. The income test, however, will not change.

Account-Based Pensions (formerly Allocated Pensions) (AP)

From 1 July 2007 all account-based pension payments and all lump sum withdrawals will be tax free for people aged 60 years and over. Pension payments to those aged 55-59 years will be taxed but will be eligible for a 15% offset with any exempt component being tax free.

New minimum pension income rules will make it possible for your account-based pension to last longer if you choose the minimum.

Contact Member Services on 1800 067 059.

If you currently have an account-based pension, you will be able to move it to the new, minimum pension income rules without having to commute and start a new pension from 1 July 2007. A guaranteed lifetime pension provided on an arm’s length basis that meets relevant existing requirements will also meet the new rules.

However, if your income stream is a ‘complying’ income stream, you will not be able to commute and transfer to the new pension. This is because complying income streams typically involve the long term investment of funds and allowing you to transfer your benefits out could create potential risks for other members as well as product providers.

From 1 July 2007, transition to retirement pensions (also known as non-commutable account-based pensions, or NCAP) will allow up to 10% of the account balance (at the start of each year) to be received as pension payment in any one year. Pensions that start before 1 July 2007 and comply with “transition to retirement” rules will be seen as satisfying the new requirements. Transition to retirement pensions will continue to be pension only (i.e. no lump sum withdrawals).

NOTE: If you are currently receiving an account-based pension and under age 60, these recent changes may impact you if you are intending to commute your existing account-based pension either partially or in full. If you are intending to commute your account-based pension, it is important that you seek financial planning advice immediately. Our financial planners are available to you and can be contacted on 1800 067 059.

If you are sitting on a big amount of cash or have just sold a business or investment property, there’s an exciting window of opportunity that you can take advantage of before 30 June 2007. Thanks to transitional measures in place, you are permitted to make after tax contributions of up to $1 million to your super before this date. Such a move will allow you to place your money in a vehicle where the tax on your investment earnings won’t be greater than 15% (compared to up to the highest marginal tax rate in other vehicles) and where the benefits you finally draw down are tax free after you turn 60.

Self-employed persons will be able to claim a full deduction for all their super contributions until age 75 (up to the new $50,000 limit).

From 1 July 2007, section 82AAT forms will be superceded. Therefore any section 82AAT notices that need to be lodged MUST be lodged before 30 June 2007. The new section 290-170 notices:

	must be given to the Fund trustee within specified time;
	can be invalid or refused by the Fund trustee in certain circumstances;
	cannot be withdrawn once lodged; and
	can only be varied in specific circumstances.