Retirees face $9,000 tax hit due to overlooked superannuation move: ‘Big missing piece'
Hundreds of thousands of Aussie retirees could be paying more tax than they should be because they haven't made one superannuation move. When you reach retirement age, you can transfer your superannuation from the 'accumulation phase' to the 'retirement phase'.
New research from the Super Members Council found around 700,000 Aussies aged over 65 who were not working full-time still had super in an accumulation account. The accumulation phase is when you are building up your super and comes with a 15 per cent tax on your earnings.
That's compared to the retirement or pension phase, where retirees can draw an income from their super fund or withdraw their funds as a lump sum. When you transfer super into a retirement phase account, the Australian Taxation Office (ATO) notes that investment earnings are not taxed.
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By sticking with an accumulation account, the research found retirees could be paying an extra $650 in taxes each year. For someone with an average retirement balance of $200,000 in an accumulation account, this could add up to an extra $9,000 in super taxes over their retirement.
While some people may be strategically holding back on moving their funds, the super advocacy group found many people weren't acting because they didn't know what to do or they were simply disengaged with their super.Super Members CEO Misha Schubert said financial advice reforms would be crucial to helping retirees access quality financial advice at an affordable cost, with many retirees not receiving basic advice to switch their super to the retirement phase.
'Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning,' Schubert said.
"Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle. The coming financial advice reforms will help make advice more affordable."
In December, the federal government announced reforms to help ensure Aussies can access quality and affordable financial advice through their super fund.
The laws will be changed to create a new category of financial adviser to give safe and simple advice to more Australians, such as choosing an insurance policy or basic questions about retirement.
Other changes include allowing super funds to provide helpful 'nudges' to consumers at stages of their life when they may need more advice, such as retirement.
ASFA research found one in two Aussies had never accessed advice on preparing for retirement.
The government has also announced plans to introduce mandatory service standards for super funds, as super funds come under scrutiny for the slow payment death and disability payments.
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