Nick Bruining Q+A: Help! I’m 55 with less than $150,000 in super. Can I boost it with extra funds?

Question I’m about to turn 55, have less than $150,000 in super and have not added to it in the past 10 years. My savings are in term deposits but will come up for renewal soon. My annual income is about $20,000 from investments. Can I add to super if I am not working and, if so, how? Answer You can contribute to your existing superannuation fund a number of ways, and there are no real restrictions until you reach 67. Your fund’s website should explain the process of making a payment to your account. You just need to decide what type of contribution you’ll be making. A concessional contribution is one where you, or an employer, can claim a tax deduction. There is no work test to satisfy because you are aged under 67. Over 67, and under 75, you would need to have worked at least 40 hours in a 30 consecutive-day period to be able to make a concessional contribution to super. Because a concessional contribution is subject to at least a 15 per cent contributions tax, we need to compare this to the level of income where you would pay any personal income tax. For a person under age pension age this amount is $22,575 which allows for the low income tax offset. With $20,000 of passive income, there is no benefit in making a concessional contribution to super. The other type of contribution is a non-concessional contribution. These are not tax deductible. There is an annual limit or cap of $120,000 for non-concessional contributions, and with your current balance of $150,000 you could also “bring forward” up to three years of contributions — or a maximum of $360,000. If you did any paid employment, including self-employment, for the year and if that before-tax income represented 10 per cent or more of your total annual income, you could also qualify for the government co-contribution. This $500 “free” payment applies to non-concessional contributions of $1000, and if your total income for the year is less than $45,400. A final method is where your partner makes a spouse contribution of up to $3000 and they become eligible for an 18 per cent tax offset, or a maximum $540 tax credit. That may boost your partner’s tax refund or reduce any tax liabilities. This rebate only applies if your taxable income for the year remains under $40,000. Question I am a self-funded, 71-year-old retiree. My wife is 51, and it is likely that I will die before her. I receive a pension from my self-managed super fund and want to know how this income stream would be taxed now if I passed, and then after she reaches 60? Answer Given that she is classified as both dependent and tax-dependent under the relevant Acts, any lump sum payments or income stream payments made to her would be tax-free at any age. They are not included as part of her assessable income and are not subject to tax or Medicare levy. It becomes more complicated if you were under 60 and/or she was also under 60 at the time of your passing and a non-tax dependent. Since you are considering these issues, you should also ensure that if the pension was not set up as a reversionary arrangement — where, in effect, she is a joint owner — you have completed the required documentation such as a non-lapsing binding death benefit nomination. Ideally, you will have one or the other, but not both. If not already in place, you should also have your wife nominated as your attorney using an enduring power of attorney. While ideally, we would all like our own passing to be quick and painless, sometimes long-term medical conditions can prevail, and ideally you should prepare for this possibility with an EPA. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association

Nick Bruining Q+A: Help! I’m 55 with less than $150,000 in super. Can I boost it with extra funds?

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