Interest rates and inflationary fears often hogged the financial spotlight in 2006, along with the booming share markets and stumbling property markets. But between now and 30 June 2007, superannuation reform is set to dominate the minds of many Australian nvestors and small business owners.

Headlining the changes is the elimination of the lump sum tax on retirement benefits for those aged 60 or over from 1 July 2007. Also superannuation pension payments for those aged 60 or over will be tax-free from 1 July 2007.

The enormously complex reasonable benefit limits (RBL) and age-based limits on deductible contributions are also set to be removed. What’s more, there’s no longer a requirement to access your super at age 65 if you’re no longer working – you can leave money in super as long as you like.  Given the continuing blowout in life expectancies – studies in the US show that life expectancy could reach 100 years of age by 2030 – this is great news.

The removal of the super lump sum tax for those 60 and over is creating uncertainty for older workers planning a pre 1 July 2007 retirement. You might consider staying put until the next tax year – this will help you avoid exit taxes and build a bigger retirement war chest.

But if you’ve had enough of work, then rolling your retirement savings into an allocated pension could prove a worthy interim measure. This gives your nest egg more time to grow within the superannuation environment. Besides, it’s possible for each member of a couple to draw down a tax-free income stream roughly equal to $33,000 annually.

The rules for ‘undeducted contributions’ (or post tax contributions) have also changed. Prior to 10 May 2006 there was no limit on post-tax contributions. However from 2007/08, a $150,000 per annum cap will apply. That said, there’s currently a window of opportunity to make $1 million of post tax contributions. The window slams shut on 30 June 2007. Should you miss out, and are under 65, then you’ll be able to make three years of contributions in a single year. In other words, it will be possible to make a $450,000 after tax contribution in 2007/08.

Self-employed people ie sole traders and partners in a partnership will also benefit under the 2007/08 changes. Leading the way is the decision to allow a full tax deduction on annual contributions. However there will be an age-based annual limit on the level of contributions that can be taxed concessionally at only 15 per cent by the superannuation fund. The annual limit is up to $50,000 or a transitional amount of $100,000 a year for those 50 and over up until 30 June 2012.

However for 2006/07, the current regime remains – self employed people can only claim a full tax deduction on the first $5,000 contributed to super. Above that only three quarters of every dollar contributed is deductible, up to the age-based limit.

Ultimately the impending super changes could affect your retirement planning significantly. So, if you’re considering a change of course, now is an excellent time to contact us to re-evaluate your circumstances.

How we can help
Over the years there have been many changes to super and these proposed changes are significant and have far-reaching implications. We can help guide you through the changes and help you take advantage of any opportunity that comes your way. We can help you:

• Reduce your tax bill now.
• Reduce or eliminate your tax bill in retirement
• Access age pension under the new rules, and
• Help you understand how the rules impact your financial situation.