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December 2016

APSS investment strategy adjustments

Market Return portfolio adjusted to better balance risk and return

On 2 December 2016, the APSS made two adjustments to the investment strategy of the portfolio where Market Return Member Savings are invested. Refer the Significant Event NoticeOpens in new window for details.

September 2016

Proposed changes to super UPDATE

The super landscape is changing

The Federal Coalition government announced a number of major changes to super in its May 2016 budget. Here’s an update.

The government’s proposed changes were put on hold until after the Federal election in July. When the re-elected government returned to implementing them, some of the original budgeted proposals were revised. The government plans to have the new laws passed in the coming months, reshaping the super landscape as the changes take effect from 1 July 2017. Keep in mind that these changes are still proposed and not yet legislated at the time of writing. Also, while most APSS members are unlikely to be all that affected by them, it’s still important to be informed and understand what’s happening in the wider super environment.

The list of proposed changes to super and their subsequent revisions are extensive and can be quite mind boggling! So this article aims to summarise the main changes and what they may mean in terms of what might be better, what might be worse for some, and what’s not all that different. Most of the changes that have been announced don’t relate directly to defined benefits but we highlight where some of the changes may affect the APSS Defined Benefit (DB).

Proposed changes for the better

Proposed changes are likely to benefit members contributing to super for a spouse and those who may now qualify to claim a tax deduction up to $25,000 per annum (indexed) when making personal super contributions. A recent government reversal on the idea of a lifetime limit on certain super contributions is also good news for members who have already made significant after-tax contributions since 2007. The key changes for the better include:

  • More opportunity to claim the full $540 low income spouse tax offset. If contributing to super on behalf of your spouse (e.g. via an APSS Spouse Account), currently your spouse’s income must be less than $10,800 per annum. Under the proposed changes, from 1 July 2017, the income threshold to claim the $540 tax offset will jump to $37,000 a year (assuming your spouse is under age 70 (and if aged between 65 to 69, meets a work test).
  • Ability to claim an annual tax deduction up to $25,000 for personal contributions. From 1 July 2017, if you’re under the age of 65 (or 65 to 74 and meet the work test), you will be able to claim an annual tax deduction, regardless of your employment status. Read more about the $25,000 limit in the next section. In addition, if you have less than $500,000 in super, it will be possible to make’catch up’ contributions provided you haven’t reached your $25,000 a year (indexed to AWOTE) limit over a rolling five-year period commencing 1 July 2018.
  • Lower after-tax contributions cap and no backdating. The government initially proposed the introduction of a lifetime limit of $500,000 (indexed) for contributions to super from after-tax salary. This was going to be effective from 3 May 2016 and backdated to include all after-tax contributions made since 1 July 2007. The government scrapped this proposal on 15 September, and replaced it with an annual limit of up to $100,000 per year from 1 July 2017, subject to an eligibility threshold, as explained under the following heading.

Proposed changes that may not be so great

Generally affecting higher income earners, the thresholds that trigger higher super tax payments are being lowered, which means more tax will be payable.

  • Before-tax contributions: From 1 July 2017, the most you will be able to contribute to super from your before-tax salary at the 15% tax rate will be $25,000 a year (indexed). If you have a defined benefit in the APSS, the ’notional taxed contributions’ that are deemed to be paid into the APSS on your behalf are treated as before-tax contributions. Therefore, before making any extra before-tax contributions to super, you need to check how much is already taken up by your notional taxed contribution, which you can find by going on-line to apss.com.au and logging into your secure section, or by calling SuperPhone on 1300 360 373. Also, a higher tax rate of 30% applies to higher income earners whose total adjusted income exceeds $250,000, a threshold reduced from the current $300,000. This could mean that more DB members have an additional 15% tax (Division 293 tax) payable on their notional taxed contributions, with potentially more financial impact on DB members because if Division 293 tax applies, it will apply to all notional taxed contributions, not just up to $25,000 of those contributions, as there is no proposed grandfathering of Division 293 tax.
  • After-tax contributions: You won’t be able to contribute more than $100,000 per year after tax to your super from 1 July 2017, and you won’t be able to contribute anything at all if your super account balance as at 30 June in the previous year exceeds $1.6 million. This concept of ’account balance’ will also extend to defined benefits (e.g. withdrawal value). The new $100,000 threshold will be less than the current $180,000 per person per year, although you may be able to bring forward up to three years of this annual limit to make up to $300,000 in one year, depending on your total superannuation balance. The new $100,000 contributions cap will be indexed to AWOTE, but the $1.6m transfer cap will be indexed to inflation (i.e. CPI).
  • Lifetime pension transfer cap of $1.6 million: Although amounts above $1.6 million can remain in an accumulation account, it won’t be possible to transfer that excess amount into a tax-free retirement account like the APSS Pension. Instead, the money over the $1.6 million lifetime cap will start incurring a 15% tax on its investment earnings.

Furthermore, members transitioning to retirement with an APSS Pre-Retirement Pension account currently pay no tax on their investment earnings but the proposed changes will mean that they start paying 15% tax on these earnings from 1 July 2017 until they retire.

Not really that much of a change

People earning less than $37,000 a year currently receive what’s called a ’Low Income Super Contribution’ of up to $500 to offset the 15% super contributions tax. This $500 maximum will remain, only it will be called a ’Low Income Super Tax Offset’ and will be subject to some new eligibility requirements.

Changes to the Age Pension

Members receiving a Government pension may be aware that last year the Government announced changes to the assets test to apply from 1 January 2017. The limits on how much income you can earn to qualify for the Government’s Age Pension haven’t changed. You can find out more about your Age Pension eligibility or make an appointment to speak to a Financial Information Services Officer about your Centrelink benefits at humanservices.gov.au/CentrelinkOpens in new window

Stay informed

We’ll bring you updates on the website’s Latest News section. If you are concerned about how any of the proposed changes might affect you, please contact SuperPhone on 1300 360 373.

June 2016

Ensure your family is looked after

While a Will is a great first step in managing your estate, the Trustee of a super fund is not actually bound to follow instructions within your Will about who receives your super.

The rules governing super mean that we are only able to pay your APSS benefit to one or more of your dependants or your legal personal representative (i.e. the executor of your estate). For more information on who can be a dependantOpens in new window.
So, the best way to ensure that your benefit from super goes to whom you prefer, is to let us know which of these eligible people you would like to receive your benefit, in the event of your death.

When it comes to nominating a beneficiary for your death benefit, the APSS offers you two choices. You can make either a binding or non-binding (preferred) nomination. Knowing that your family is being looked after in the event of your death, may help to provide you with peace of mind.
When it comes to nominating a beneficiary for your death benefit, the APSS offers you two choices. You can make either a binding or non-binding (preferred) nomination. Knowing that your family is being looked after in the event of your death, may help to provide you with peace of mind.

Binding nominations

When you make a valid binding nomination, the Trustee is legally obliged to pay your benefit in accordance with your stated wishes. Binding nominations have a fixed term of three years, and can provide you with greater certainty about payment of your benefits. It is therefore important that you update your binding nomination if your personal circumstances change, such as having a child, remarrying or divorcing. This will ensure that your nomination continues to reflect your wishes. Your binding death benefit nomination will generally remain valid despite a change in your circumstances, (such as separating from your spouse, but not filing for divorce) therefore if you do not update your nomination, it may no longer reflect your wishes when you die.

Be sure to complete the Binding Nomination form correctly.
When making a binding nomination, please make sure that you complete all sections of the Binding beneficiary nomination form correctly. The APSS can only pay in accordance with your binding nomination if:

  • the person(s) you have nominated are classified as dependants for superannuation purposes at the time of your death, or your legal personal representative (see the section ’who you can choose as your beneficiary’ for more information);
  • the total percentages for your nominations add up to 100%;
  • it is signed and dated by you in front of two witnesses (who both sign at the same time) who are aged 18 or over and are not nominated by you on the form; and
  • your nomination is received by us before your death.

If your binding beneficiary nomination is invalid at the time of your death the Trustee will decide who will get your super.

Non-binding (or preferred) nomination

Alternatively, you can make a non-binding nomination, which has no expiry date and is used as a guide by the Trustee. This means that, if you die, the Trustee is obliged by law to conduct its own investigations into your personal circumstances before deciding who should receive your benefit payment. The Trustee can take your non-binding nomination into account, but must act in the best interests of your dependants when making a decision.
When deciding who should receive your death benefit, remember that current superannuation law only allows it to be paid to your dependants (see below) or your legal personal representative (i.e. your estate).
As always, if you hold a Pension Account, you also have the option to make a reversionary beneficiary nomination. Please see the Choosing your beneficiariesOpens in new window fact sheet for more information about this.

How to choose or change your beneficiaries

Non-binding nomination - Login to your account or call SuperPhone and make your changes over the phone. You can also download the Nominate your beneficiariesOpens in new window form from the website, or call to have one sent to you.
Binding nomination - Download the Binding beneficiary nominationOpens in new window form or call to have one sent to you.

May 2016

Proposed changes to super

NOTE: There have been several developments since the following proposed changes announced in the May 2016 Federal Budget were announced. See Insight September 2016 Opens in new window for the latest information (as at October 2016).

The Federal Government has announced some changes to super in this year's budget. The proposed changes will impact some retirees and some people that are still working to save for their future in different ways. To learn about how the proposed changes affect you read on...

Changes to before-tax super contributions

From 1 July 2017, the most you can contribute to super from your before-tax salary at the 15% tax rate (or 30% for high income earners) will be $25,000 a year. This will be the same for everyone under age 75. However if you have less than $500,000 in super, you can make catch-up contributions if you haven't reached your $25,000 a year limit during a rolling five year period.

Currently, if you're 50 or over the most you can contribute to super from your before-tax salary at the 15% tax rate (or 30% for high income earners) is $35,000 a year. If you're under 50, the most you can contribute in this way is $30,000 a year.

Reminder

Don't forget that, where you have a defined benefit, notional employer contributions to fund that defined benefit are counted towards your concessional (before-tax) contribution cap. If you are an APSS Defined Benefit member, you can see what your notional employer contributions are by logging into the secure section of the APSS website.

Changes to after-tax super contributions

There will be a lifetime limit of $500,000 (indexed) on how much you can contribute to super from your after-tax salary (currently this is $180,000 per person, per year).

This change is proposed to be effective from 3 May 2016, and to apply to after-tax contributions you've made from 1 July 2007. If you've already gone over this amount, you can keep this money in your super but you won't be able to make any more after-tax contributions without paying a penalty tax.

Tax deductions for personal super contributions

From 1 July 2017, anyone under age 75 can claim a tax deduction for personal contributions they make to super regardless of their employee status. The amount of the annual deduction will be up to $25,000 less employer contributions for that year (including notional contributions and salary sacrifice contributions).

Changes to spouse contributions

From 1 July 2017, you can make contributions to your spouse's super if they earn up to $37,000 a year and are under 75 years old, and receive a low income spouse offset of up to $540 a year.

Currently, you are only eligible for the maximum tax offset of $540 if your spouse's income is less than $10,800.

Changes for low income earners

If you earn less than $37,000 a year, you currently receive a Low Income Super Contribution from the Government to your super account of up to $500 to offset the 15% tax payable on your super contributions. From 1 July 2017, this will become the Low Income Super Tax Offset and will stay at a maximum of $500 a year.

Changes for higher income earners

From 1 July 2017, the Government is proposing to apply a 30% tax rate to concessional (before-tax) contributions if your income plus deductible and before-tax contributions reach $250,000 (currently this is $300,000).

A lifetime pension transfer cap of $1.6m is also proposed (see below).

Introduction of a lifetime pension transfer cap

From 1 July 2017, a cap of $1.6 million will apply to the total amount of super you can transfer into a retirement income account like the APSS Pension over your lifetime. If you've gone over this cap, you'll need to reduce the amount of money in your retirement income account by 1 July 2017. Investment earnings on assets in excess of the cap which are converted to or remain in an accumulation account will be taxed at 15%.

The income and earnings on your retirement income account will continue to be tax free when you retire.

Removal of the work test if you are under 75

From 1 July 2017, if you're aged between 65 and 74, you no longer need to meet the work test to make before-tax or after-tax contributions to super. Under current requirements, if you are aged between 65 and 74, you must have worked for a set period of time in the financial year to be able to make personal contributions to your super.

Changes to transition to retirement strategies

From 1 July 2017, investment earnings on assets in your APSS PREPOpens in new window account will be taxed at 15% until you retire. Investment earnings on transition to retirement strategies like the APSS PREPOpens in new window account are currently tax free.

Changes to the Age Pension

Last year the Government announced changes to the assets test for the Age Pension, which will be introduced on 1 January 2017. The limits to how much income you can earn and qualify for the Government's Age Pension haven't changed.

You can find out more about your Age Pension eligibility or make an appointment to speak to a Financial Information Services Officer about your Centrelink benefits at humanservices.gov.au/Centrelink

Remember, these announcements will need to be passed in Parliament in order to become law. We will keep you up to date with further developments. In the meantime, you can visit budget.gov.au for more information.

March 2016

Super basics

Superannuation is designed to be a tax-effective way to help you save and invest for your retirement. Taking an interest in understanding the basics now, may help you to achieve the retirement lifestyle you want.

What is super and what's it for
Superannuation (or super) is a long term investment specifically designed to help you save money while you are working so that you and your family have money for when you retire. For most Australians, super represents their largest single investment after buying their own home. The Government's Age Pension provides an amount that is less than most people want to live on in retirement. Super helps us to take control of our retirement and, if there's enough of it, provide a standard of living that we would like. There are two main types of super. Click hereOpens in new window to learn more.

When you can access your super
In general, to access your super you must have reached a specified age (between age 55 and 60) - exactly when you can access your super depends on when you were born. MoneySmart's super and pension age calculator at moneysmart.gov.auOpens in new window tells you when you can access your super (keep in mind that there may be tax payable on your super if you are under the age of 60). For more information, go to accessing your superOpens in new window.

If you are eligible to access your super and you have retired, you will need to decide if you want to take it as a lump sum or as an income stream (like your regular pay). Alternatively, if you are eligible to access your super but have not yet retired, leaving your super in the APSS with a Pre-retirement Pension (PREP) will allow you to access some of your benefit as an income stream while still working and earning a wage - find out more by reading the Getting ready for retirementOpens in new window fact sheet.

How you can contribute to your super
As an APSS Employee, Spouse or Rollover Account member, you have the option to supplement your super in a number of ways.

Making personal contributions either before-tax (concessional contributions) or after-tax (non-concessional contributions) into an APSS Member Savings account is one of the most effective ways to boost your super savings. To learn more about these types of contributions and how easy it is to start making a difference to your super, read the Boost your super savingsOpens in new window fact sheet.

The amount of super you have and how to estimate your super balance for retirement
For an estimate of how much super you have now, simply login to the secure section of the website with your APS number and PIN and click on the 'benefits payable today' page under the 'Member Benefits' tab.

To get an idea of whether your retirement savings are on track, use the benefit projector on the secure section of the APSS website to estimate your future retirement savings. You can also adjust some of the calculator settings like your personal contributions, investment returns and retirement age to see what a difference this could make to your overall benefit.

How much will you need to retire?
There's a different answer to this question for everyone.
To enjoy a 'comfortable' retirement lifestyle (as defined by the Association of Superannuation Funds of Australia or ASFA for short) single members who retire would need a balance of approximately $545,000, and couples would need a balance of approximately $640,000. These amounts assume a partial Age Pension. If your living standards are more modest, then the lump sum requirements may be lower.

Click hereOpens in new window for more information about ASFA's retirement standards.

Consolidating your super
If you've had more than one job, it's quite likely you have more than one super account.
Consider consolidating super from other funds into the APSS, as well as any lost super that you may have. Doing this may save you money on fees and make it easier to keep track by consolidating your super in one place with one lot of paperwork.
To combine your accounts, just complete a Transfer other super into the APSSOpens in new window form.
Before rolling your accounts over though, it's important to consider any exit fees, changes to insurance cover or loss of benefits or investment options that may result from closing your other super accounts.

Find out if you have 'lost super'
It's not uncommon for people to have lost track of the super accounts that were set up for them by past employers. 'Lost super' is transferred to the Australian Tax Office (ATO). You can find out if you have 'lost super' by using the ATO's online Super SeekerOpens in new window.

Your super is your money. By taking a few small steps now you could make a huge difference in the long run and give yourself a lot more money to enjoy in retirement.