Ask the Expert: How flexible is your super? Tips for a more comfortable retirement

There are opportunities to make further contributions to super. But some care needs to be taken in how you go about it.

There are opportunities to make further contributions to super. But some care needs to be taken in how you go about it. Photo: Getty/TND

  • Question 1: If I have not contributed extra super contributions for the past three years, I can add extra contributions to this year that I missed out on in previous years at the concessional tax rate. I want to know if I can access the 50k of extra contribution towards the first home super saver scheme or will need to continue contributing 15k in following years until it has amassed 50k.

Voluntary contributions to super can potentially be released from super under the First Home Super Saver Scheme (FHSSS).

Depending on your individual tax rates and circumstances, it can be a tax-effective way to save for a first home.

Eligible voluntary contributions include both voluntary non-concessional (after tax) and voluntary concessional contributions (pre-tax). All contributions must be within existing contribution caps.

In your question you seem to be alluding to that you have access to additional concessional contributions under the ‘carry forward’ rules. This allows you to carry forward unused concessional contributions in past years and still stay within the cap.

As an example, the standard concessional cap is $27,500 but if only $20,000 was used last year you may be able to use a cap of $35,000 this year. That is the $27,500 cap from this year and an unused amount of $7500 from last year. Note that MyGov will let you know how much you can contribute under the carry-forward concessional cap.

A few things to bear in mind:

  1. Your total super balance must be under $500,000 at the previous June 30 for you to be eligible to use the carry-forward rules. Again, MyGov will show this.
  2. Only voluntary contributions (plus associated earnings) can be withdrawn. Typically, salary sacrifice contributions are most effective, these are considered voluntary and are counted under the concessional cap.
  3. Amounts that can accumulate under the FHSSS are limited to $15,000 per financial year and $50,000 in total.

Continuing from the previous example, let’s say you have employer SG contributions of $10,000 for the financial year. This counts towards your concessional cap but cannot be used for the FHSSS as they are not voluntary contributions.

You therefore still have $25,000 of voluntary contributions under the concessional cap if using the bring-forward arrangements. However, only $15,000 of this can count towards the FHSSS in any one financial year.

Thus, you can contribute more than the $15,000 and still be under the concessional cap but the excess above $15,000 will be preserved in super until you reach at least age 60 and can’t be used for FHSSS.

If your main goal is to save for a home and not for retirement, do not exceed $15,000 of voluntary contributions in any financial year. And when you get to $50,000 in voluntary contributions overall, you have maxed out this scheme.

You super fund can provide you with more information.

  • Question 2: I am 68 and working remotely full time. I have a $600k mortgage and around $345k super. I plan to continue working full time at least another two to five years, but would like to transition to retirement at some stage. If l use super to pay part of my mortgage and reduce the interest, is there a tax penalty? Alternatively, l am considering renting in the country and renting out my home to help pay down my mortgage.

While these days it’s not uncommon to head towards retirement with a mortgage, given your age and super balance your outstanding mortgage does seem high.

As you are over age 65 you can access your super at any time tax free, and there is no tax penalty paying down your mortgage.

However, even after this you will still have a sizeable mortgage. It good to see you are being realistic and looking to work a few more years.

I’m not sure of your salary but you could look to salary sacrifice into super which is a very tax-effective way of saving money, and as I said earlier, given your age you can take the funds out at any time tax free.

If you can find a cheap place to rent and charge a much higher rent on your current home, then it would be worth investigating.

So would staying in your home and just renting out a room or taking on a lodger. You could also look at downsizing your home and buying a place with the proceeds. Depending on the value of your home, this could reduce or eliminate your mortgage and free up cashflow in retirement.

It would be worth doing a budget to see how much you can save, and how fast you can pay down your mortgage. The Moneysmart mortgage calculator can assist.

Once retired, if you do need additional income, you could look at Centrelink’s reverse mortgage option called the Home Equity Access Scheme (HEAS).

You should also look at obtaining some financial advice to help you with prioritising your goals, including how fast you can pay down your mortgage, how much income you want in retirement and how much do you need to save to achieve this.

  • Question 3: Do you reply only to viewers with a superannuation account? Being a single full pensioner, can I gift more than $10k yearly to offspring without affecting my remaining assets of $270,500 (excluding $1m+ home I live in)?

I receive many questions and do my best to reply to as many as possible. Many are in relation to superannuation, but I also receive many in relation to Centrelink.

To recap Centrelink’s gifting and deprivations rules, if you give away more than $10,000 a year, or $30,000 over five years, Centrelink will still count the excess amounts under the assets test and deem it under the income test.

As an example, if you give away $20,000 to your kids this year, $10,000 will still be counted by Centrelink for the next five years and the other $10,000 disregarded.

In your situation, as your level of assets ($270,500) is below the threshold to receive the full age pension ($280,000 for a single home owner) you can give away as much as you like without it affecting your pension.

However, don’t leave yourself short. Just remember there are always emergencies and unforeseen events that pop up and may require significant funds.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

The New Daily is owned by Industry Super Holdings

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