Retirement can significantly impact your super account, so you need to be aware of the rules applying to your particular circumstances.
If you can afford it, making extra contributions (i.e., spouse contributions, personal contributions) is a great way to boost your retirement savings. It can reduce your contributions tax as well.
Of course, super funds have much stricter rules around how and when you can access your super fund, and you need to take that into account before making a super contribution.
Aged Care Weekly, Australia has the answers to frequently asked questions on superannuation contributions after you’ve retired.
Why add to your super after retiring?
After you’ve retired, adding more to your super account can be a rational choice as super savings are taxed at lower rates, with pre-tax income outside the super system.
And if you draw an income stream from your super account, you may even claim a tax-free, so continuing to save through super can have sound financial situation. However, remember to provide your tax file number (TFN), as it is unique to every taxpayer.
Can you contribute to super after 65?
Normally, once you are 65 or more and retired, you cannot put any more money into your super account, but rules have changed in more than a year.
The old rule
People that reach age 65 to 74 with less than $300,000 in super will make voluntary super contributions as long as they met the previous year’s work test exemption.
To make contributions between 65 and 74, you cannot be retired and must meet a “work test exemption.” It also applies to voluntary member contributions made on your behalf, for example, salary-sacrifice contributions.
The updated rule
According to the new rules from 1 July 2019, a client 65 to 74 is qualified to make voluntary superannuation contributions. They must have satisfied the work test exemption during the financial year that the contribution is made.
This allows people aged 65 and above with a total amount in the “total superannuation balance” (TSB) of less than $300,000 before 30 June to make voluntary contributions where they do not meet the work test exemption, provided they fulfilled it in the financial year before the one in which the contribution is made. Also, WTE can only be used once.
What if you return to work?
You may retire and then suddenly be persuaded back to work by someone who values your proficiencies. Maybe you get bored and decide retirement doesn’t suit you, while others worry their retirement savings are being depleted too quickly. That isn’t a problem, as you can always come back out of retirement.
What contributions can I make?
When you return to work, you can rebuild your super guarantee via your employer’s compulsory super contributions or your voluntary ones.
Naturally, there is always a limit, especially in contribution. Your employer’s combined total and salary sacrificed contributions must not be more than $25 000 per financial year. If you’re self-employed, concessional contributions are income tax-deductible.
How much contribution can I put?
The existing non-concessional contribution cap is 100 000 or 300 000 over three years if you are under age 65. Only people with a total super balance of less than 1. 6 million will be eligible to make non-concessional contributions.
These caps are known as excess contributions. If you go over the said cap, the Australian Taxation Office may be able to allow you to withdraw the extra amount from your super fund, along with 85% of the investment capital gains. Any associated benefit that is withdrawn will have tax deduction at your marginal tax rate, taxed at 15 % rebate, even less than, if already paid in the fund.
What do you do with your super after retirement?
When withdrawing your super, you can choose to accept it as a lump sum, a retirement income stream, or both. Should you choose a lump sum, the entirety of your total superannuation balance will transfer to your personal bank account.
You could leave it unmoved until you absolutely need it, or you could start paying yourself a pension using account-based pensions from your super fund. You may also withdraw all or some of the pension as a lump sum.
Make sure you take the time to consider your options, get in touch with professionals for advice, or simply just personal financial advice where necessary. These steps may help you get closer to the happy retirement you’re looking forward to.