Over Sixty Winter 2022 Digital

OVERSIXTY.COM.AU | WINTER 2022 15 YOURMONEY This barred many who had inherited money or had sold investment properties or had otherwise failed to contribute other savings to super before they retired and who could not past the work test, from contributing these additional funds to super. By removing the work test, savings that formerly could not be contributed to super, now can. Once inside super, these funds can be used to acquire assets to support an account-based pension and once that occurs, those assets will be forever tax free, both in terms of capital gains and income tax. The existing contribution rules still apply. These limit the total amount retirees can contribute to super and thenuse to support an account-based pension to $110,000 a year up to amaximum$1.7million in super savings. However it means a couple can structure their affairs even after retirement, to hold up to $3.4 million across two super accounts both in pension paying mode, and never again pay taxes on these assets. If these are the only assets they own beyond their home, they need never lodge another tax return. Anyone aged 67-74 will still be required to meet the work test if they want to claim a tax deduction against their earnings for any super contributions and any contributions are still subject to the existing limits. Three-year bring forward rule At the same time, the Federal Government is allowing anyone age under 75 years of Super changes bring tax relief to retirees PATRICIA HOWARD YOUR MONEY R etirees will face sharply lower tax bills, and in most cases will pay no taxes at all, following dramatic changes by the Federal Government to the superannuation contribution rules, effective fromJuly 1, 2022. Significantly, the much-vaunted abolition of the work test for anyone who is retired and under 75 years of age, will free many retirees to move funds currently sitting outside super to super’s more tax benign environment. The changes also allow those in retirement and aged under 75 years of age to take full advantage of the three-year bring forward rule, as well as being able to utilise the downsizer contribution rules from age 60, rather than age 65. Under the old work test requirements, retirees aged between 67 and 75 years of age needed to be able to prove they had worked 40 hours in any 30-day period in that financial year in order to contribute new funds to their superannuation accounts. age to take full advantage of the three-year bring forward rule, which allows for retirees to effectively bring forward three years of contributions into one financial year. With non-concessional, or after tax, contributions currently limited to $110,000 a year, the changes mean individuals can contribute up to $330,000 and for a couple, they can contribute up to $660,000 into superannuation in one financial year. As part of the three-year bring forward rule, retirees cannot contribute to super in the following two financial years, but most industry analysts believe this one step will still be a game changer for many retirees. It means that, if managed correctly, a single retiree can effectively contribute up to $550,000 to superannuation as long as they spread it across three financial years, starting with $110,000 in the first two years and $330,000 in the third. A married couple could contribute up to $1.1 million. The downsizing advantage The final significant change to the super contribution rules is the Government’s decision to drop the qualifying age from 65 to 60 for anyone wanting to take advantage of the downsizer rules. This allows anyone who decides to sell their home and buy a less expensive home, to contribute up to $300,000 to superannuation. This contribution can be made in addition Continued on page 6 Recent changes to superannuation rules mean great financial gains and tax relief for retirees. Photo: Patricia Howard YOUR MONEY Our financial expert outlines all the ways you can expect to benefit from the recent changes to super contribution rules About the author  Patricia Howard, author of The No- Regrets Guide to Retirement: How to live well, invest wisely and make your money last (Wiley), is a licenced Australian financial adviser. She has a Commerce Degree, holds an Australian Financial Services Licence and recently passed the FASEA Financial Adviser exam. Visit her at www.patriciahoward.com.au