Super Boost out of reach for older Australians, at least for now

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Older Australians nervous about topping up their super in volatile times have greater uncertainty after delays to the recent Super Boost Budget measures.

With many super account holders still nervous from the recent market downturn, it is likely that many pre-retirees and retirees will be closely watching their balances over the coming months in the hope of a recovery. Even the modest gains are likely to be celebrated. Older Australians may be nervous about topping up their super account in the short term given market volatility however most financial commentators may attest to the buy low and sell high mantra.

Undoubtedly our day to day lives have been disrupted as a result of the COVID-19 social distancing measures. Not even the politicians are immune, with the sitting calendar for Federal Parliament changing as a result of their inability to gather due to social distancing and isolation measures. Recently, the Prime Minister announced a trial return to the house in May, however the intermittent sitting schedule has cast uncertainty over the Super Boost measures announced in last year’s Federal Budget that were due to commence on 1 July 2020.

The Budget measures announced provide contribution flexibility for those approaching retirement age.  The bundle includes allowing those aged 65 and 66 to make voluntary contributions without needing to meet the work test, increasing the age limit for spouse contributions from 69 to 74 and extending the bring-forward three years’ worth of non-concessional contributions to those aged 65 and 66.

While these measures allow increased ability for older Australians to make super contributions as they approach retirement, many may be considering if now is the right time given the current market conditions. And indeed, while the Government had committed to passing the associated legislation before the 1 July 2020 commencement date, this commitment was in a pre COVID-19 world. The world has changed dramatically in the space of a few months and, rightly so, the Government’s focus has been redirected.

The Super Boost creates several opportunities for clients to consider. Especially for those who failed the work test or age requirement wanting to have one last chance to boost their retirement savings. But, how do you advise clients who would have benefitted from these proposed changes without legislative certainty? In short, cautiously! 

While the measures would allow those age 65 and 66 the ability to make personal contributions, spouse contributions and the bring forward provisions, as it currently stands the work test applies and age-based conditions must be observed. What makes sense in these times of uncertainty is to identify which clients could benefit from these potential rule changes, assess their appetite and get the ball rolling. Where clients have been holding off utilising their full non concessional contribution caps so they still have the possibility of triggering the bring forward provisions at a later stage, agree a plan forward should legislative certainty fail to eventuate over the coming weeks or even months. Even if certainty comes at the eleventh hour, being prepared well before the drop-dead date will allow for action to be taken. 

Super funds are likely to be inundated with client requests. In recent weeks pension minimums have been halved and more than 880,0001 Australians have registered their intent to utilise the COVID 19 early release of super measure. These measures will have an impact on processing times. These combined with the seasonal end of financial year workload are likely to see an increase in processing timeframes and possibly bring year-end cut-off dates forward. To combat this, working toward an arbitrary cut-off date within your practice will ensure intended client contributions are made well ahead of fund cut-off dates.

All eyes will be on the daily Bills list when the politicians return to the House in May. Even more importantly, will there be any amendments made to the original terms of the Super Boost measures? Are we likely to see any delays to the start date or changes to the age requirements? If, and perhaps this is the biggest uncertainty, the older Australian Super Boost Bill may be on the list, keeping an ear to the ground will allow you to get ahead of the curve (no pun intended). Assessing the Bill, which clients may benefit and getting their contribution ducks lined up ahead of time will create a much smoother approach. Especially as for some of your clients, this may be the last opportunity to get large sums into super.

For more information on the super boost measures and how they make benefit your clients contact the BT Technical Services team on 1800 655 901 or email technical@btfinancialgroup.com.

 

[1] https://www.ato.gov.au/Super/APRA-regulated-funds/In-detail/News/CRT-Alerts/2020/CRT-Alert-017/2020---Update---interest-in-coronavirus-early-release-of-super/

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