Arch talk.

How does superannuation work ?

How much can you contribute to superannuation before 30 June ? How much do you need to withdraw before 30 June ? Plus more !

Arch Capital Transcript

Hi and welcome to today’s update.

Today we are going to be taking about Super contributions, drawdowns and some of the recent changes that have been made.

I like to look at super as just a tax structure and you’ve got to remember when you’re adding to super, your accumulation account gets taxed at 15% and so when you put money into that fund, you normally get taxed at 15% as well. This is by your employer or your own personal contributions.

This year, the amount you can put into super from your employer or your own contributions is $25,000 as a maximum amount.

For some people you can obviously top that up, for others it already be over that. If you go over that there’s some excess tax that is payable.

Next year, that is going up to $27,500.

Before 30 June (end of the financial year), it is really worth to check if you have maximised your contributions, to make sure they are in cash before 30 June.

The other way to get money into your super is via a separate method. What was outlined previously was what is known as a concessional or taxable contribution. The other way is by tax-free or a non concessional contribution. There are a lot of technical terms, but let’s just focus on the tax-free aspect and the other of course being taxable.

What this means is that you are able to put money into your superfunds that is zero percent taxed. How do you achieve this?

Well it could be you’ve sold a business, a house, had some inheritance or something along these lines.

Typically, you can put a hundred thousand dollars a year, there are some other ways times that being $300,000 in one go.

There are also some rules around downsizing if you’re over 60 and you sell a house you can potentially put three hundred thousand into your super.

If you sell a business there’s some other rules where you can put these tax-free amounts in, but generally speaking against the 25,000 going up to 27 and a half thousand, plus the one hundred thousand that is going to also increase up to $110,000 next year.

Therefore, $330,000 as your three-year amount nice and simple right?

Before 30 June you’ve got to do a few checks for yourself and if you are ever unsure, of course you can always call us. What you are looking for here is to make sure that you have maximised contributions if that is if suitable for you.

The other thing which is happening with super is the contribution from your employer is moving to 10% from 1 July, which is a good thing for most people.

What happens then is that for a lot of our clients they get to retirement phase and they start drawing money from their super fund and that becomes a pension account. This doesn’t mean you’re on the age pension necessarily, however this pension account doesn’t get taxed if you’re fully retired and over 60. You can draw money from this amount, which is also not taxed if you’re over 60, which is a pretty nice setup of zero and zero.

Historically this was only up to 1.6 million, which as of 1 July is going up to 1.7 million per person in super tax free.

This is one of the world’s only legal tax havens, which is a pretty good system. Obviously there’s all sorts of rules and tricky bits, but essentially when taken at a high level it is quite simple.

You accumulate, you pay 15%.

Once you retire and are over 60, you pay 0% and there is a maximum amount you can in that account and there is a minimum amount that you have to draw down from it each year.

Because of COVID-19, the amount that you have to draw down has been halved from 1 July then goes back up to the normal amounts and that starts at 4% if you’re 60, 5% if you’re 65, 6% if your 70 and so on, until you are over 100 and you are drawing down most of your balance.

Hopefully this helps and as has been stated, before 30 June it is really important time to check in that you’ve made your contributions and if you’re in pension phase, you have withdrawn your minimum and of course reach out we can help you if there are any questions.

Another thing would like to run through quickly is that we have just done a big refresh of our website. Here we have a picture of our great team here. So you can put some faces to names when you are talking to or emailing some of the team.

The new website looks pretty nice and it has all the contact details there and a little more about who we help and what we do.

Hopefully you are finding these videos really helpful, make sure to check out our new website and some photos of our team which went up on the bridge, with some funny photos to look at there.

Have a great weekend and speak to you in a few weeks.


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