19. Understanding the super rules
if you’re 55 or over

Superannuation rules are especially relevant if you’re approaching retirement or have already retired.

So what’s changed?

The superannuation rules have changed. This fact sheet provides a summary of the new rules, which are not only simpler, they're more attractive.

The super rules
Tax free super at age 60 Withdrawals from super will be tax free if taken after age 60. This applies to lump sum or regular income payments (such as an allocated pension).
No Reasonable Benefit Limits (RBLs) RBLs have been removed.
After-tax contributions limited to $150,000 a year¹ You can only make after-tax contributions of up to $150,000 per year. However, to accommodate larger contributions, people under age 65 will be allowed to bring forward two years of contributions. For example, a person under age 65 will be able to make up to $450,000 of contributions in the 2007-08 financial year but will then be unable to make further non-concessional contributions until the 2010-11 financial year. Any contributions made over this limit will be taxed at the top Marginal Tax Rate (plus medicare levy).
Before-tax contributions are limited to $50,000 a year¹ However, as you're over 50, you can make $100,000 a year in before-tax contributions until 30 June 2012.² Any before-tax contributions your employer makes will be counted towards this limit. This includes superannuation guarantee contributions and salary sacrifice contributions.³ Any contributions made over this limit will be taxed at the top Marginal Tax Rate (plus the Medicare levy) and counted towards your after-tax contributions limit. Please note: Special conditions apply for Defined Benefit schemes.
Your Tax File Number is required If your Tax File Number is not provided to your super fund: before-tax contributions that exceed $1,000 in a year (including employer and salary sacrifice contributions) will be taxed at the top Marginal Rate (plus the Medicare levy)⁴, after-tax contributions cannot be accepted by the fund, if you are under age 60, your withdrawals may be taxed up to the top Marginal Tax Rate (plus the Medicare levy).
You can keep your money in super, indefinitely However to get the benefit of tax free investment earnings you will need to transfer it to a pension and start to receive a regular income.
A simplified set of rules will apply to income streams You will be required to take a minimum payment each year, with no maximum limit⁵.
Uniform rules across all income streams for Centrelink assets test From 20 September 2007, 100% of all new pensions will be counted towards the Centrelink asset test. At this time, the assets test taper rate will also be halved.

1. These limits will be indexed to Average Weekly Ordinary Time Earnings (AWOTE). The limits for before-tax contributions will only be increased by amounts of $5,000 once the increase is greater than $5,000. The limit for after-tax contributions will always be three times the limit for before-tax contributions.
2. The $100,000 limit will not be indexed.
3. It is your responsibility to ensure you do not exceed the before-tax contribution limit.
4. The $1,000 relief does not apply to new super accounts from 1 July 2007.
5. If you start a pension whilst aged 55+ and still working under “transition to retirement” rules, a maximum annual payment of 10% of account balance will apply each year until you retire or reach age 65.

What’s in it for me?

Investing in superannuation has always been a great way to save for retirement and the changes to super rules now make it an even more attractive option. With this in mind, here are some strategies for you to consider:

Strategy 1

Salary sacrifice could save you tax

Salary sacrifice can be an effective strategy, because it allows you to put your before-tax salary straight into super - potentially saving you tax.

Your super is no longer taxed when you withdraw it, as long as you wait until age 60 to make withdrawals. This could result in significant tax savings.

If your total income is $50,000 a year, here’s how a $5,000 salary sacrifice could help save you tax and boost your wealth:

	Take Cash Salary	Salary Sacrifice into Super
Gross salary	$50,000	$50,000
Less: salary sacrifice	-	$5,000
Taxable income	$50,000	$45,000
Less: income tax	$11,010	$9,435
Net take home pay	$38,990	$35,565
Super salary sacrifice	-	$5,000
Less: 15% contribution tax	-	$750
Net super investment	-	$4,250
Take home pay plus net super investment	$38,990	$39,815
Note: This is a tax only strategy. Marginal tax rates for 2006-07, including 1.5% Medicare Levy has been applied

It’s important to note the example above does not take into account your eligibility for the Government co-contribution, which you may receive as a result of making after-tax contributions. You may be eligible for the Government co-contribution if your total income (assessable income plus reportable fringe benefits) is less than $58,980 a year. Other conditions apply.

With this in mind, you should consider your own personal circumstances before making either before-tax and/or after-tax contributions. See our ‘Super Co-contributions’ fact sheet for more information.

Strategy 2

Add more to your super

While you can only contribute $150,000 p.a. to accommodate larger contributions, people under age 65 will be allowed to bring forward two years of contributions. For example, a person under age 65 will be able to make up to $450,000 of contributions in the 2007-08 financial year but will then be unable to make further non-concessional contributions until the 2010-11 financial year

Strategy 3

Contribute more now

People under 50 are limited to before-tax contributions of $50,000 a year. However, as you’re over 50, your limit will be $100,000 p.a. until 30 June 2012.

Strategy 4

Choose how and when you retire

Up until now, most people have worked full-time until they reach a certain age, then permanently retire.

Whilst many people will still approach retirement this way, increasingly people are opting towards a gradual reduction of working hours over a number of years. Many Australians are opting for a ‘sea change’, where they continue to work part-time in a job they enjoy – perhaps even well into their 70’s – but also have extra time for travel, family and themselves.

You now have greater flexibility as to how and when to draw down your superannuation. You don't have to take your super at a certain age, and you can start a transition to retirement allocated pension while you’re still working to supplement your income if you move to part-time work.

For more information, read our ‘Ease yourself into retirement’ fact sheet

Strategy 5

Consider waiting until age 60 to draw on super

If you wait until age 60 to access your super, it will be tax free. You can take your super out before age 60, provided you’ve reached your preservation age, however, if you do, part of your super will still be taxed.

Super Checklist: Consider the following strategies to make the most of the new rules:
Strategy	Why	What to do next
Give Russell SuperSolution your Tax File Number (TFN)	This prevents you paying unnecessary taxes and allows you to make after-tax contributions.	Check if your TFN has been provided by calling our Helpline or checking your last benefit statement. If you need to supply your TFN, download a copy of the 'Your Tax File Number Form' or call our Helpline.
Consider making additional contributions: Salary sacrifice After-tax contributions	Please note contribution limits apply. Potentially even more tax effective than before, and effective at a broader range of income levels. Could be more effective than salary sacrifice, depending on your circumstances as you may be eligible for the Government co-contribution.	Talk to your employer’s payroll department. Read our ‘Super Co-contributions’ fact sheet or contact us about making an after-tax contribution.
Consider waiting until you reach age 60 to access your super	Ensures the super you withdraw is tax-free.	Call our Helpline to discuss your options.
Consider a Transition to Retirement Pension	Greater flexibility on how and when you access your super.	Call our Helpline to discuss your options.

Do you have more questions?

Helpline: 1800 555 667

Web site: www.russell.com.au

Email: yoursupersolution@russellsuper.com

Need advice?

We can also refer you to a qualified Financial Adviser

Issued by Russell Employee Benef ts Pty Ltd ABN 70 099 865 013, AFSL 220705 (“REB”). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. The information has been compiled from sources considered to be reliable, but is not guaranteed. Any examples have been included for demonstrational purposes only and should not be relied upon for the purpose of making an investment decision. Past performance is not a reliable indicator of future performance. Any potential investor should consider the latest Product Disclosure Statement in deciding whether to acquire, or to continue to hold, an investment in Russell SuperSolution. REB is part of the Russell Investment Group (‘Russell’). Russell or its associates, officers or employees may have interests in the financial products referred to in this magazine by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell or its associates, officers or employees may buy or sell the financial products as principal or agent. You may contact Russell SuperSolution on 1800 555 667.

19. Understanding the super rules if you’re 55 or over