What does the budget mean for you?
With the impact of the COVID-19 on the economy, the federal government had no choice but throw the kitchen sink at pulling Australia out of recession.
Having said that, we went into this recession in relatively good shape.
The main theme, to get the Australian economy humming again in 2021.
So, let’s look at what you might get out of this…
Still working
Tax Cuts
First and foremost, we all love a tax cut. The proposed 2022 tax cuts have been brought forward. These will be backdated to 1 July 2020. So, part will be included in your 2021 tax return.
$40,000 ($1,060)
$60,000 ($2,160)
$80,000 ($2,160)
$100,000 ($2,445)
$120,000 ($2,745)
$140,000 ($2,565)
$160,000 ($2,565)
$180,000 ($2,565)
$200,000 ($2,565)
What to do with your tax cut?
While to some this is not a great deal, it’s extra???????????? in your pocket. Perhaps look to add it to your super as a salary sacrifice contribution. If you are not using up your $25,000 limit (don’t forget this includes your employer contribution). Maybe even automate. Every little bit counts.
If you are using all your $25,000 super limit, perhaps look to add to your mortgage if you have one.
Super Changes
Portable super – we don’t see this one as much in today’s working world. But, there are still employers who require new employees to start a new fund. Rather than use the one they already have.
To be introduced on 1 July 2021. This will reduce the need to have multiple super funds. You’ll be able to carry one with you through all your changes in employment.
Ultimately this will save you in fees and possible insurance fees. This makes a lot of sense given the number of people who have multiple super accounts.
Addressing Underperforming MySuper Funds
In an effort to protect super members from underperforming funds, the government is attempting to remove these from the super system. It’s the main aim, to put more money back into super fund members pockets.
I’m all for this, though question how they are going to consistently achieve this. There are many differences between one super fund to the next. From the way, they determine what’s a risky asset and what’s not. If you’re in an industry fund or pooled super investment, many balanced funds are 70-95% in risky/growth assets. Generally not appropriate for someone heading towards retirement.
If you’ve been a follower for a while, you’ll know we class super as tools in the tool bag. There is much more about your retirement plan you need to know prior to determining the best fit super fund.
The best way to choose a super fund is to work out what the details of your retirement plan are. I’m assuming you have a detailed written plan (even if it is only one page). From how much money you need, how much risk you need to take vs what you have and how it needs to be structured to support the lifestyle you want. Then it’s about working out which cost-effective super option you require to facilitate your plan.
Want to discuss your super options more, feel free to book a call here at our expense.
Key super strategies you should be considering:
#1 Tax-deductible contributions/salary sacrifice – if you are in a position to and aren’t maximising your current contributions ($25,000 pa), you may want to look to increase them.
#2 Spouse-splitting – I’m surprised many more are not using this strategy. This is great is you are looking at levelling up your super fund with a spouse. You’re able after the end of the tax-transfer 85% of your employer/tax-deductible or salary sacrifice contributions to your spouse’s super account.
Why would you do it? If one partner is approaching their super balance limit ($1.6m), you’ll be able to maximise the amount of money which is held in a tax-effective environment.
Balancing out your super accounts may provide estate planning benefits. Within everyone’s super account there are taxable components. If these are to find their way to your estate at some point in the future (after you die) they are taxed at 15% (hidden death duties). With the right planning, you may be able to reduce this tax by withdrawing and contributing back into your super fund. It’s wise to seek advice from a professional in this space.
This is why we believe not only do you require a retirement plan, but also a super plan. One which allows you to optimise your super account to provide more for you in retirement.
Want to find out more? Feel free to book a call here at our expense.
Retired
Unfortunately, there was very little in the way of benefits for those who are retired.
If you are on a government pension or hold one of their cards, like the Commonwealth Seniors Health Care Card, you’ll receive a little assistance.
Two payments of $250 to be paid in December 2020 and March 2021.
Account-Based Pension Income Payments
Due to the market downturn in March, the government altered the minimum rates of pension payments you could elect to take from your income stream.
This has been reduced by 50% and relates to the FY20 and FY21.
Let’s say your account-based pension was worth $1,200,000 and you were taking 4% ($48,000). You could reduce the minimum payment to $24,000. Obviously, you’d need to assess your own needs first.
We’ve found many of our retired client’s we’re taking more than they needed prior to this change. So they were able to take advantage of the changes to retain more in their pension accounts.
Now more than ever, there’s an enormous amount of noise and confusion about what to do with retirement plans. Perhaps, you feel a little lost or maybe drifted a little off course.
If you’d like some help navigating your way through this ever-changing landscape so you can live your best life free from worrying about money. Feel free to schedule a call here or on the link below. If you prefer to just call me. My number is 0401 253 729.
Here’s to living your best life!
Glenn Doherty – CFP – Money Mentor | Taking the stress out of planning your self-funded retirement | Founder of Jigsaw Private Wealth
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Schedule hereAdvice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Spark Advisors Australia Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.