By Darren Withers
This year has thrown grey clouds over a lot of well planned futures. But if you peer through the gloom and focus on what’s possible, it soon becomes clear that there may be some opportunities out there.
Reduced minimum pensions
For those drawing super pensions, the reduced minimum amount that applied for 2019/20 will apply again in 2020/21. This means that if you don’t require everything you are currently drawing, this could be an opportunity to reduce pension payments (by up to 50%) and help preserve your super balance during the downturn.
Round two of the cash bonuses
The government is getting ready to pay a second $750 economic support payment to some Centrelink recipients and concession card holders. This payment will be based on eligibility as at 10 July. Included in the payment are people with the Commonwealth Seniors Health Card (CSHC). So, even if you don’t qualify for a pension, you may be eligible for the cash bonus. In particular, self-funded retirees that have reached pension age should ensure they have assessed if they are eligible for the CSHC. Unlike the age pension, it is not asset tested and has a very generous income test.
Super Contributions before 30 June
Personal tax deductible super contributions (known as concessional contributions) should be considered. The maximum limit for the year is $25,000, and this includes employer contributions, salary sacrifice and personal deductible contributions.
The 2019/20 year is also the first year where catch-up concessional contributions are available. As an example, if you contributed $15,000 last year, then you have an extra $10,000 that you can catch-up on top of the normal $25,000 limit.
Please note however, this option is only available for those that had total amounts in super of less than $500,000 as at 1 July 2019.
Super Contributions after 30 June
Although the decline in investment values can be distressing, they also can create opportunities to make extra super contributions. There are several types of contributions that are limited, based upon your total super balance. This is measured on 30 June each year, so a lower balance at the end of the 19/20 year could create extra contribution opportunities for 20/21. Please note, non concessional contributions are only available to people who have less than $1.6 million in super.
Starting new pensions
Under the transfer balance cap rules, the government now limits how much super monies people can use to start pensions to $1.6 million. For those people who haven’t previously used all their limit, a downturn can actually be a good time to start pensions. This is because more of your super can go into pensions without breaching this cap.
Ceasing an employment arrangement after age 60 is a condition of release for super, so if you have lost your job there could be a chance to start a pension, even if you are hoping to return to work in the future.
The transition to a new financial year and the decline in markets can present many strategic opportunities, so please contact your Elston adviser with any queries.
If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.