Question 1

How do I know how much of super is taxed and how much is not taxed? 

I have no idea what I am looking at when I look at my super total. All I know is that I have a bucket of funds in super, but really no idea of how I can access it or how it kicks in when I decide to retire.

If you have a ‘bucket’ of funds, or even if you have a little, it’s in your interest to take an interest.

Unfortunately, many Australians do not make the most of their superannuation assets leading up to and in retirement. As highlighted by the Retirement Income Review (and others), many people die with the bulk of the wealth they had at retirement intact.

Super funds themselves are now bound by a retirement income covenant. This requires them to develop a strategy to help members achieve and balance three key retirement income objectives:

• Maximising expected retirement income
• Managing risks, and
• Ensuring flexible access to funds.

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This means super trustees must actively assist members in planning for and managing their retirement income,

Therefore, your super fund should be able to offer information and advice around this. Contacting the fund is a good place to start, along with the government’s Moneysmart website.

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Generally, you can start accessing it once you attain age 60, and you have full access if you leave work after turning 60 and reach 65 (whether still working or not).

If you access super after age 60, then it is paid tax free (except in limited circumstances). Your super fund can let you know what your taxable components are, but they will come into play only once you die.

Question 2

I am 64 and receive a pension from my defined benefit super fund. I have another super account. Can I change that to a pension as well?

Yes. You can have as many pensions as you want, up to the allowable “transfer balance cap” (currently $2. million).

In fact, having a flexible pension product, like an account-based pension combined with a defined-benefit pension, usually provides a good outcome.

• The defined pension will provide a reliable steady income for life.
• The account-based pension will provide a flexible income stream where you can alter the income payments, make lump-sum withdrawals and choose to invest the funds into a suitable investment option(s).

Question 3

Can I claim on a varying tax deduction for a personal contribution by withdrawing funds and depositing the same amount back in before the end of financial year

Generally you can claim a personal tax deduction on contributions made to super if you are under age 67. If you are between 67-74, you must meet a work test.

These are personal contributions to your super fund where you claim the contribution as a tax deduction. They allow you to:

• Reduce your taxable income, which may reduce your income tax
• Boost your retirement savings
• Make decisions about your super contributions, based on your tax position at the end of the financial year

There is nothing stopping you taking money out of your super, then putting it back in and claiming a tax deduction.

However, you do need to be mindful of the Australian Taxation Office and what is called part IVA.

As per ATO part IVA rules, the action cannot be for the sole or dominant purpose of obtaining a tax benefit. Other benefits must be identified and recorded.

Most contributions of this type should be fine. However, you should speak with your super fund or seek tax advice over your specific circumstances to be sure.

Craig Sankey is a licensed financial adviser and head of Technical Services and 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.