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.
Disclaimer: This report has been prepared by the IOOF Research team for Millennium3 Financial Services Pty Ltd ABN 61 094 529 987, AFSL 244252. Millennium3 Financial Services Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Millennium3 Financial Services Pty Ltd. This report may be used on the express condition that you have obtained a copy of the Millennium3 Financial Services Pty Ltd Financial Services Guide (FSG) from the website. Millennium3 Financial Services Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Millennium3 Financial Services Pty Ltd. Millennium3 Financial Services Pty Ltd and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither Millennium3 Financial Services Pty Ltd nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law Millennium3 Financial Services Pty Ltd, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.