Financial success can hold a different meaning for all of us.
Despite this, financial success is often linked to something we all tend to have in common, financial goals—our vision for the future.
This vision can often centre on retirement (and our desired retirement lifestyle) and the accumulated wealth needed to support it.
Notably, the financial decisions you make throughout your life will often determine whether you achieve your financial goals, and in doing so, make your version of financial success a living and breathing reality.
With the above in mind, approaching retirement planning early on can help you to benefit from the power of compounding, and provide flexibility to make adjustments if and when required. This approach can also assist you in working towards your financial goals at a more comfortable pace.
In terms of accumulating wealth and funding retirement needs, super can be a powerful investment structure and is something we have recently covered.
Importantly, to accumulate wealth in super, it takes, among other things, contributions. However, this isn’t without its limits—there are contribution eligibility considerations to be mindful of. For example, aside from the various limits on the amounts that can be contributed, age and work test conditions also exist.
Below, we provide a brief overview of age and work test conditions on contribution eligibility.
Aside from the age and work test, another important contribution eligibility condition is your Tax File Number (TFN). For voluntary employer, personal and spouse contributions, your TFN needs to have been supplied to your super fund. As an example, if your super fund doesn’t have your TFN then they are required to:
- tax employer contributions at 47%*.
*Generally concessional contributions are taxed at 15%, and if you have income and concessional contributions totalling more than $250,000, an additional 15% (called Division 293 tax) applies to concessional contributions exceeding the $250,000 income threshold that are within your concessional contributions cap.
- not accept member contributions including non-concessional and personal deductible contributions, which also means that you are unable to participate in the Government’s Co-Contribution scheme.
Your annual super statement should list whether you have supplied your TFN. If you haven’t supplied your TFN, your super fund will have information on how to update your member details.
Important things to note
In the recent 2021-22 Federal Budget papers, several proposed policy measures were announced:
- The Government will reduce the eligibility age to make downsizer contributions into superannuation from 65 to 60 years of age. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this measure to apply from 1 July 2022.
- The Government will allow individuals aged 67 to 74 years (inclusive) to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions without meeting the work test—subject to the contributions caps. Individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions. The measure will apply from the start of the first financial year after Royal Assent of the enabling legislation—the Government expects this measure to apply from 1 July 2022.
For specific advice customised to your individual circumstances, contact Carrick Aland’s multi award-winning Wealth Planning team on 07 4669 9800 or visit carrickaland.com.au/wealth-planning/.
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