The Howard Government made sweeping changes to superannuation in Australia in July 2007, and spent a lot of money spruiking about the "Better Super" deal for Australians. But what's all the hype about and is it a better deal?
Super benefits for... Whom?
In a nutshell, the rules around superannuation contributions have been relaxed, certain areas have been simplified and some people may end up with more in the hand. One of the main changes is that people looking to retire have more flexibility in how and when they can draw down their super. Previously, you could only get a payout when you were 65 and no longer working. And then, you had to take it all out - whether you wanted to or not. Now, those more than 60 years of age can take out some of their super in a lump sum or as a pension or leave some in to continue building. Alternatively, they can work part-time and keep adding to it. (This may be a bit of a trap and could result in people who are financially challenged continuing to work up to age 75).
Those who are 60-plus and entitled to a super payout will now get it tax-free for the first time. (This is apart from those with untaxed contributions, such as public servants - though, their rate is reduced). In addition, self-employed can now claim a full tax deduction for their super contributions. Further, people who have not been eligible for Government pension payments in the past may now have the opportunity, thanks to rules allowing them to have more assets and still receive a pension.
For those who change jobs frequently, particularly younger people, the process of switching super funds when you go from job to job has made been easier. There is now one form to fill out and send to a chosen fund. Tracking lost super has also been simplified, with the Australian Taxation Office's free online search engine, "SuperSeeker".
Co-contributions to superannuation
One way to take advantage of the changes is to make co-contributions to your superannuation. For those who are eligible, the Federal Government will match personal superannuation contributions with dollars of their own - up to certain limits. Some criteria include having a total income of less than $58,980 and being aged less than 71 years. However, when considering co-contributing, it is worth weighing up the benefits. If you're young and not planning to retire for eons, it may be better to have the cash available to put towards other investments such as a managed fund or property. For the middle-aged, however, it may be beneficial forward planning - so that retirement can be a more relaxing, rather than taxing time.
