Super Update

Your superannuation savings are an example of the power of compounding. The time, the returns and the amount invested will determine the result.

Albert Einstein (supposedly) said, “Compound interest is the eighth wonder of the world. He who understands it, earns it: he who doesn’t, pays it”.

Warren Buffett also refers to the power of compounding and recommends getting started early to take advantage of it. He describes the power of compound interest as building a little snowball and rolling it down a very long hill. As the snowball rolls down the hill, it collects more and more snow until it becomes a huge snowball.

Different options to increase your super savings are

Take advantage of all opportunities provided (if applicable) such as:

• Carry forward concessional contribution rules
• Government co-contribution rules
• Downsizer contributions
• Split your concessional (taxable) super contributions with your spouse
• Contribute for your low, or no income, spouse and claim a tax offset

Maximise use of the contribution caps available to you by:

• Salary sacrificing part of your pre-tax salary
• Make additional contributions from your after-tax salary
• Paying super if you’re self employed

Periodically review your super investment options, fund returns and fees paid.

Please speak to us if you’re interested in growing your retirement savings or would like us to undertake a review to see if you’re on track to meet your retirement goals.

 

Making sure your Super passes to who you intend

Super is frequently one of our largest assets, other than the family home, and it is not automatically dealt with under your Will.

To ensure your Super is paid to the intended beneficiaries, review the following key areas:

Beneficiary Nomination

• Binding Nomination: Make sure you have a valid binding nomination that specifies who will receive your super. Check if it’s up-to-date and valid, as these typically need to be renewed every three years. Although in an SMSF they can be non-lapsing if the Trust Deed allows it.
• Non-Binding Nomination: If you have a non-binding nomination, review it to ensure it reflects your current wishes. While it’s not legally binding, it guides the trustee’s decision.

Super Fund Rules

• Verify the rules of your superannuation fund regarding beneficiary nominations. Some funds may have specific requirements or forms that need to be completed.

Personal Details

• Ensure that the personal details of your nominated beneficiaries are accurate, including full names, addresses, and relationship to you.

Legal Documents

• Review your Will and any other estate planning documents to ensure they align with your superannuation nominations. Discrepancies between these documents can lead to complications, which may end up in the courts.

Trustee Contact

• Contact your superannuation fund to confirm that your nominations have been processed correctly and that there are no issues or additional requirements.

Changes in Circumstances

• Update your nominations if your circumstances change, such as marriage, divorce, or changes in your family situation.

Tax Implications

• Understand the potential tax implications for your beneficiaries. Different beneficiaries may be taxed differently depending on their relationship to you and the type of superannuation benefits received.

Review Regularly

• Regularly review your superannuation nominations, especially after major life events or changes in your financial situation.

By reviewing these areas regularly and making any changes as your circumstances change, you can help ensure that your superannuation benefits go to the people you intend.

If you’d like assistance with this or to discuss your circumstances please contact us.

ATO Targets the valuation of Investments in SMSFs

Our Super Update in June 2024 provided full details of the unlisted investment valuation rules.

Unlisted investments include unlisted company shares, unlisted trust units and property, both residential and commercial.

Earlier this year the Taxation Office wrote to more than 16,500 SMSF trustees questioning why the valuation of their unlisted investments had not changed from year to year.

The accurate valuation of unlisted investments is essential for compliance with superannuation laws and regulations. It affects the fund’s financial statements, tax calculations, and the calculation of member benefits.

As a result of this targeted attention by the Taxation Office SMSF auditors will be looking for objective and supportable evidence for all unlisted investments.

Please ensure that property valuations received from real estate agents clearly identify the methodology they have used and if applicable provides detailed evidence of, for example, recent sales in the area.

 

Pending Legislation

Proposed Reduction in tax concessions on Super Balances over $3m (Division 296 tax)

The legislation for this measure has still not been passed and lobbying of Senators continues.

The intended start date is 1 July 2025, with assets being measured against the $3 million cap on 30 June 2026.

See the November Super Update for details of how this new tax works.

Superannuation on Paid Parental Leave

Subject to the passage of legislation, eligible parents with babies born or adopted on or after 1 July 2025 will receive an additional payment.

The additional payment will be based on the Superannuation Guarantee (12% of their Paid Parental Leave payment), as a contribution to their nominated superannuation fund.