Archive for 'Super'
It’s no secret that the median super balance for Australian women at the time of retirement is significantly lower than that of their male counterparts. The Australian Commission & Investments Commission (ASIC) have reported that men retire with about twice the amount as women. The discrepancy is reportedly even higher between Mums and Dads. Between lower wages and a higher likelihood of having an interrupted working life for women, women also tend to live longer and thus require more super to cover more years. Unfortunately, between personal finances, business financial capabilities, and governmental policies, actions to close this gap can be limited.
Where viable, private companies can consider:
- continuing paying superannuation to staff during parental leave.
- paying full-time super benefits to part-time parents. This has already been implemented by Viva Energy (a Shell subsidiary). From the ABS, women are much more likely to be working part-time than men.
- increasing the percentage of base salary put toward their employees’ super accounts.
Merging your super is vital to maximising your retirement savings.
Changing jobs over the years will put you at risk of losing some of your super if your previous employers have set up accounts you have forgotten about. Fees will erode the balances on these inactive accounts and result in you losing your hard earned super. You should also consolidate to maximise the interest accrued on your single super balance.
Merge your super with this checklist and keep your super savings on track for success.
Research your fund’s policy
Compare your active super accounts so you can make the right choice about which one you should close. You should assess:
- Exit fees
- Insurance policies
- Investment options
- Ongoing service fees
- Performance of the funds
Once you have made your decision, you can combine your super balance by:
- Requesting to merge your accounts through your chosen super fund
- Apply through your myGov account or the ATO
Keep in mind that funds will take time to process your request and rollover.
The new Australian Financial Complaints Authority (AFCA) will make it easier for individuals and small businesses to make complaints about their superannuation financial firms.
The Coalition government has responded to criticisms of previous dispute resolution bodies by creating a new financial disputes framework. AFCA has been described as a “one-stop shop” that will improve outcomes for consumers and increase the efficiency of the dispute resolution process.
AFCA has been given authority over a range of complaint areas including:
- Superannuation annuities
- Corporate, industry and retail super funds
- SMSFs (handled under investments and advice jurisdiction)
- Approved deposit funds
- Small funds
- Retirement savings accounts
- Trustees, insurers and decision makers of relevant super bodies
What you can make complaints about
Your super complaint to AFCA must adhere to its governing rules. AFCA has specific time limits for complaints but no monetary limits.
You can make complaints about:
- The advice you were given about a superannuation product
- Fees or costs that were incorrectly charged or calculated
- Information you weren’t given about the product including fees or costs
- Errors in the information provided to you; for example, if your benefit statements are incorrect
- Decisions your super provider has made
- Payment of a death benefit
- Giving instructions that were not followed
- Transactions that were incorrect or unauthorised
Employers must make superannuation contributions on behalf of their employees. SuperStream is the ATO’s electronic and standardised solution that streamlines the super payment process.
Using SuperStream for employers means:
- You can use one online channel to pay multiple funds
- Less room for error during data entry, due to fewer steps
- Transactions reach funds faster
You must make contributions to a super fund through a SuperStream solution unless you are eligible for the following exemptions:
- Personal contributions if you are self-employed or a sole trader and make after-tax contributions to a super fund for yourself
- Contributions to your SMSF where you’re a related party employer. For example, if you are an employee of your family business and your super guarantee contributions go to your SMSF.
Once you have decided that SuperStream is right for you, the following steps will help you stay compliant:
- Choose an option: you can choose from a payroll system, your super fund’s online system, a super clearing house and a messaging portal
- Collect information and update your records: refer to the ATO for an exhaustive list of the information you will need from your employees
- Pay the SuperStream way: pay as soon as possible so you can get used to the system
The ATO has issued a warning to the public regarding illegal early release of super schemes, which are subject to severe penalties.
There are strict rules around when you can access your super so your current decisions do not jeopardise your quality of life in retirement. The ATO has reminded the public you may only access your super early if you have experienced severe financial hardship or you have reached the preservation age and have stopped working.
How these schemes work
The promoters of these schemes:
- Encourage you to transfer or rollover your super from your existing super fund to an SMSF to access your super before you are legally entitled to
- Target people under financial pressure or those who do not understand super laws
- Claim you can access your super and put the money towards anything you want which is not true
- Charge high fees and commissions, presenting the risk of losing some or all of your super to them
- May request your identification documents which can result in identity theft
Penalties apply to promoters and individuals who illegally access their super early. If you illegally obtain your super early, it is included in your assessable income even if you return the super to the fund later. If you are an SMSF trustee, you may be fined up to $420,000 and liable for jail terms of up to five years. Civil and criminal penalties apply to promoters.
The ATO classifies contractors paid for their labour as employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).
Super contributions must be made for these individuals if you pay them:
- Under a verbal or written contract that is wholly or principally for their labour- that is, more than half the dollar value of the contract is for their labour
- For their personal labour and skills- which may include physical labour, mental effort or artistic effort and not to achieve a result
- To perform the contract work personally – they must not delegate.
You do not pay super to a person when you make a contract with someone other than the person who will actually provide the labour, like a company, trust or partnership.
How much to pay
The minimum super amount you have to pay is 9.5 per cent of each worker’s ordinary time earnings. For contractors, employees calculate the minimum super amount on the labour component of the contract. The ATO will accept their market values of the labour if the values of the various parts of the contract are not detailed in the contract.
SMSF trustees have the freedom to invest as they choose to grow their retirement savings, which is why it is vital that they check in on their investment strategy regularly. Maximising your retirement nest egg depends on how well your investment strategy functions at different phases in your working life. This is why your investment strategy should shift according to your changing financial circumstances. A new job, fluctuating markets, changes in tax laws or your retirement drawing closer may mean it’s time to switch up your investments.
Here is a checklist to get you started.
- Map your risk profiles
- Consider circumstances including risk, diversity, liquidity and member’s circumstances
- Take out insurance for members
- Confirm all fund investments comply with super laws and are allowed under a trust deed
- Plan to regularly review your investment strategy
- Document any decision about investment strategy
Trustees must comply with reporting obligations to avoid penalties from the ATO.
The following trustee reporting checklist to make sure you are stress-free at tax-time.
- Value the funds’ assets at their market value at 30 June
- Pay any minimum annual income stream payments required under super laws
- Get an actuarial certificate if required
- Prepare the fund’s end of year financial accounts and statements
- Appoint and approve a SMSF auditor not more than 45 days before the SMSF annual return is due
- Lodge your SMSF annual return by the due date
- Lodge your transfer balance account reports if required
- Review the fund’s investment strategy and document the review
- Maintain all the fund’s records as required under super law
Setting up an SMSF can be complex, which is why a checklist is useful to streamline your process. Before you set up your SMSF, first determine if having an SMSF is a commercially viable option.
Once a decision is reached and you are about to start your SMSF, here are the basic steps to get things started:.
- Determine which members will be in your fund?
- Decide if you will you seek professional help to assist your set up?
- Decide whether the fund should have individual trustees or a corporate trustee
- Establish a suitable trust and trust deed
- Register your fund with the ATO
- Set up a bank account
- Prepare an exit strategy
- Get an electronic service address so the fund can receive contributions from employers
The ATO’s new data revealed that although the total amount of lost and unclaimed super reduced by $420 million in 2017-2018, there is still $17.5 billion left to be found.
The ATO has prioritised reuniting people with their lost super spread across over 6.2 million accounts. In the past financial year, the ATO was successful in merging $3 billion into active super accounts across the country.
Typically people lose contact with their super funds when they change jobs, move house or forget to update their details. Although some people may intentionally maintain multiple accounts, those who are unaware they have an inactive account may not realise that fees are possibly eroding their super. You should remain engaged with your super fund throughout all stages of your career so you can maximise your retirement nest egg.
You can view your super account details, including lost or forgotten accounts, by linking your myGov account to ATO online services. If you are unsure whether consolidating your super is the best option your super fund can advise you on issues such as insurance that may be attached to your accounts.