Did you know that the contribution age has Increased from age 65 to age 67 ?
Should the super guarantee be increased. I don’t think so and here is why.
Arch Capital Update – Friday, 20 November 2020
The Super Guarantee and Contribution Ages
Welcome to today’s Arch Capital update.
Amidst the chaos of this year we have talked mainly about investment markets. Today we will change tact a bit and talk about some of the legislative agenda for superannuation and some changes that have been passed that may have been missed because everyone has been more focused on their health and safety this year rather than bills that have been passed in Parliament.
When I first started out advising, about 20 years ago, a key age in super was 55. This was the first age you were allowed to access your super. Then it became 60 and 60 became a very exciting age because you could suddenly retire and have tax free income. This notion of a tax free retirement was a huge change brought in by the Howard/Costello government.
Then 65 became a bit more of a bigger date and now it has suddenly gone from 65 to 67 and no one has noticed. Why is that the case? Well, just this year in August Parliament passed a bill that allows the contribution levels to now be made up to the age of 67 where the old cap was 65. So, that’s quite good and we have a lot of clients around that age where we really had to make sure all your contributions were in before you were 65 and that bill has now passed to increase the age to 67. This will open up some good planning opportunities.
If you are around that age, for those in their early 60’s you have a got few more years, if you are 65 it’s even better news because you have now got a couple more years to maximise your contributions. There is a bit of detail surrounding this announcement so please reach out if you have got any questions in how this change might apply to you.
The other big thing in the papers, such as in today’s Financial Review, which is very topical is about the super guarantee and also the Callaghan review. This is another review into super and it is really important because now I think we are seeing a bit more of a practical view of what really are the issues. Superannuation as a policy is actually a really good idea, but unfortunately there have been lots of problems with it. There has recently been a bit of a halt on the proposal to increase super guarantee levels and I think that is a good idea until they sort out some of the problems in the industry which are currently being sorted.
I don’t think you should increase your super guarantee levels, as it will impact your lower to middle income earners more than higher income earners, before the system is more efficient and much more transparent. We are certainly on that page. We want everyone to have a greater interest in their super, but we want their super to work hard for them and not so much for the industry.
So, there are a few changes there one being the increase in the super age from 65 to 67 and some other topical news going on behind the scenes with legislative changes.