Potential tax traps for pre-retirees - Canstar
Pre-retirees need to check their superannuation contributions now to avoid the "potential tax traps" of a reduced cap for concessional contributions, according to Canstar.
The Government has halved the cap to $25,000 for this financial year.
Canstar said retirees could end up paying up to a "nightmarish" 93 per cent by trying to balance catching up on the rules and injecting the maximum contributions. It is conceivable some people will lose their retirement savings rather than build on them, Canstar said.
The 31.5 per cent tax rate on contributions exceeding the cap would not be desirable for those on a 30 per cent tax rate, Canstar said.
And pre-retirees who exceeded the concessional cap and the after-tax contribution cap would be hit with 46.5 per cent tax rate twice, according to one example from the Australian Taxation Office.
Canstar research manager Chris Groth said despite the "potential tax traps", contributing extra to superannuation was a good thing, and if members played by the rules they could save on tax.
"The crucial thing is to check your contributions now and speak to your financial planner for guidance. This applies equally to the retired and those thinking about retiring," he said.
Canstar has also undertaken research to highlight the five-star funds in each of the three account-based pension profiles according to average super balances.
Account-based pensions are an important method of funding retirement living, it said.
Agest Super, Amist Super, Media Super and VicSuper were among the funds named.
AUTHOR
Staff Writer
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