Latest news with #retirement savings
News.com.au
a day ago
- Business
- News.com.au
Simple change set to pocket Aussies $110m in super a week
Australian workers are losing $110m a week in unpaid superannuation. Super Members Council (SMC) analysis of 2022-2023 tax data shows 3.3 million Australian workers lost collectively $5.7bn in superannuation payments. This is based on the average worker losing $1730 in superannuation a year. Australians living in the ACT or the Northern Territory had the highest average underpayment, while more than one million people in NSW lost $1760 a week, 848,000 Victorians lost about $1670 and 377,450 people living in Western Australia lost $1790. The SMC said unpaid super could cost the average worker more than $30,000 from their final retirement nest egg. When not intentional, superannuation underpayment can occur due to the timing of payments. While wages and salaries are paid weekly, fortnightly or monthly, businesses only need to pay the superannuation guarantee quarterly. Under new laws coming in July 1 2026, superannuation payday reforms will require employers to pay superannuation, salaries and wages at the same time. These reforms have been three years in the making after the federal government first announced the changes back on May 2, 2023. SMC deputy chief executive Georgia Brumby said Australians would pay the price for any further delays. 'Each week these laws are delayed, Australians are made $110m poorer in retirement, which means less money to pay the bills after a lifetime of hard work,' Ms Brumby said. 'The sooner this legislation is introduced and passed, the more time and certainty it will give businesses and the super payment system to prepare so all workers can get paid their super on time and in full. 'Payday super will not only stamp out unpaid super, it'll put nearly $8000 more in the average Australian's pocket at retirement thanks to more frequent payments and the power of compounding.'
Times
2 days ago
- Business
- Times
Chancellor told to rethink inheritance tax raid on pensions
Savers with pensions worth less than £90,000 should be able to pass on their pots free from inheritance and income tax to spare grieving families the confusion of complex rules, the government has been told. From April 2027 most retirement pots and death benefits will be included in someone's estate for the purpose of calculating inheritance tax (IHT), leaving more families facing hefty tax bills of up to 40 per cent. The change will close a loophole that gives savers a uniquely tax-efficient way of passing on wealth to the next generation — those who can afford it can use other assets to live off in retirement, leaving their pension savings untouched to be passed on inheritance tax-free when they die. But critics have warned that bringing pensions into the IHT net will put a significant administrative strain on grieving relatives. The Investing and Saving Alliance, which represents more than 270 financial services firms, has urged the government to rethink its plans and spare smaller pensions from its tax raid. You can pass on £325,000 of assets from your estate without your benefactors paying any inheritance tax (£500,000 if you leave your main home to a direct descendant and your estate is worth less than £2 million). Any assets above those thresholds are usually taxed at 40 per cent. Anything left to a spouse or civil partner is inheritance tax-free, and they can also inherit any unused allowances, meaning a couple can leave £1 million tax-free between them. This will continue from April 2027. • Surge in wealthy using insurance to beat inheritance tax hit At the moment, pensions are inheritance-tax free, so if you die with a pension pot, you can pass it on to whoever you like and they will not pay any IHT. If you die before 75, they will not even have to pay income tax on withdrawals. Under Reeves's plans, those pension pots will become part of your estate, removing a valuable tax perk. You will still be able to leave a pot IHT-free pot to a spouse or civil partner, but they will not in turn be able to leave it to your children without them having to pay tax on it. One proposal from the Investing and Saving Alliance and the consultancy Oxford Economics is to keep the IHT exemption on inherited pension pots but to only protect those worth less than £90,000 from income tax, regardless of when the pension holder died. If, however, the beneficiary was a dependent of the deceased they would be able to make withdrawals from the pot over time, allowing them to manage the income so they paid less tax. If they were not a dependent, they would have to take the full value as a lump sum. A second proposal is for a tax on inherited pension pots above a certain threshold, with no exemption for spouses or civil partners, which could prove unpopular. The Alliance and Oxford Economics suggested three scenarios that they said would raise the same amount: an inheritance tax of 25 per cent on the value of pots above £150,000; a charge of 30 per cent on values above £200,000; or 35 per cent on values above £250,000. They said that each proposal would raise about £1.3 billion in their first year and £2 billion a year after that. The government estimates that its plan will raise £1.46 billion a year by 2029-30. The Office for Budget Responsibility predicts that IHT receipts, including those from pensions, will rise to £14.3 billion by 2029-30, up from £7.5 billion in 2023-24. The Times understands that the Alliance submitted the second proposal to HM Revenue & Customs during its IHT consultation with the pensions industry between October and January. Renny Biggins from the Alliance said: 'The government's proposal to include pension funds within IHT risks creating unnecessary stress and delays for grieving families, and causing long-term behavioural change among consumers that we don't yet fully understand, particularly around pension contribution levels and withdrawals. 'We show that the government's fiscal and policy goals can still be met without creating additional issues and concerns for people at the worst possible time.' • Why a wealth tax won't work When IHT on pensions is introduced it is expected that pension schemes will have to liaise with the executors of an estate to calculate and pay any IHT due on savings pots. Meanwhile the clock will tick on the six-month deadline in which IHT must be paid to avoid interest being charged on overdue payments. Rachel Vahey from the investment platform AJ Bell said: 'Of the hundreds of replies to the consultation, many in the industry we have spoken to have shared one central message — the IHT proposals are simply unworkable and have the potential to wreak havoc for grieving families. 'There are better solutions out there that don't cause confusion and high costs for executors and beneficiaries, mean swifter payment of benefits to loved ones and tax to HMRC. These solutions would ultimately make it easier for clients to plan how to spend their pension pot and make sure that their loved ones also have enough money to live on.' The Treasury said: 'We continue to incentivise pension savings for their intended purpose — of funding retirement instead of them being openly used as a vehicle to transfer wealth — and more than 90 per cent of estates each year will continue to pay no inheritance tax after these and other changes.'
Yahoo
2 days ago
- Business
- Yahoo
ATO reveals $5.7 billion superannuation issue costing millions in retirement: 'Stamp out'
Australians are losing $5.7 billion in retirement savings each year due to employers not paying their superannuation entitlements correctly, new analysis of Australian Taxation Office (ATO) data has revealed. The huge losses have sparked calls for 'payday super' reforms to be passed when parliament returns this month. About 3.3 million Australians missed out on superannuation entitlements, averaging $1,730, in the 2022-2023 financial year, Super Members Council analysis of taxation data found. The amount of super going unpaid increased by $600 million from the previous year, with workers now losing $110 million each week. More than one million people were underpaid super in New South Wales at an average of $1,760, more than 848,000 in Victoria at an average of $1,670, and more than 679,000 in Queensland, missing out on an average $1,720. RELATED Aussie cafe owner's 'pressure' of impending $124,000 superannuation change NAB, ANZ slash interest rates as lenders move despite RBA cash rate hold: 'Not a coincidence' ATO tax return warning for 2 million Aussies over dangerous act Payday super reforms will mean employers are required to pay their employees' superannuation at the same time as their salary and wages. Under the current rules, it only has to be done quarterly. The reform, first announced in May 2023, is due to come into effect from July next year. However, it has not yet been legislated by the government. Super Members Council Deputy CEO Georgia Brumby said any delays to the law would mean less money in retirement for Australians, which means "less money to pay the bills after a lifetime of hard work". 'The sooner this legislation is introduced and passed, the more time and certainty it will give businesses and the super payment system to prepare — so all workers can get paid their super on time and in full,' she said. 'Payday super will not only stamp out unpaid super — it'll put nearly $8,000 more in the average Australian's pocket at retirement, thanks to more frequent payments and the power of compounding.'Leading accounting bodies have been calling on the government to delay the planned start date of the legislation. CPA Australia, CA ANZ and the Tax Institute said they all support the plan but have argued the July 1, 2026 date is 'unreasonable' and 'should be deferred for, ideally, 24 months, but at least 12 months'. They have argued the payment of super is more complex than wages and involves clearing houses, payment gateways and super funds. Employers will be given a seven-calendar-day deadline from the payment of wages to pay superannuation. If this is missed, they will be liable for an updated super guarantee charge which would include the shortfall, daily interest and an extra enforcement charge. In November, the ATO revealed its actions had led to $932 million in previously unpaid super reaching the retirement accounts of 797,000 employees in the past year. The ATO noted that more than 92 per cent of super entitlements were paid without the need for ATO intervention. Employees can check their super account via myGov to see what super payments have been paid into their funds. If you suspect your super hasn't been paid in full, on time and to the correct fund, the ATO recommends checking with your employer and your nominated super fund. You can report unpaid super to the ATO.
Yahoo
2 days ago
- Business
- Yahoo
$105,000 superannuation warning over growing ‘mini-retirement' trend driven by Gen Z, Millennials
Australians are being warned taking a 'mini-retirement' could have a much bigger impact on their superannuation retirement savings than they think. The new work trend is being driven by Gen Z and Millennials and involves taking several shorter breaks over the span of your career, rather than waiting to retire. Perth man Riley McPherson recently completed his first mini-retirement, taking two months off between jobs in property. The 39-year-old said he planned to take a micro-retirement every five to 10 years. "I wasn't spending as much time with my family and connecting with my kids," he told 9News.'Mini-retirement' trend offers young workers 'happiness' as Baby Boomer 'glory years' dream dies NAB, ANZ slash interest rates as lenders move despite RBA cash rate hold: 'Not a coincidence' ATO tax return warning for 2 million Aussies over dangerous act While taking a micro-retirement could mean more time with your loved ones and boost your mental wellbeing, Colonial First State head of technical services Craig Day said it was not without long-term costs. "You may end up actually having a much bigger impact on your retirement nest egg than you may otherwise have thought," he said. Calculations found a 26-year-old who took a year off each decade could end up with 20 per cent less in their superannuation by the time they retire. That's a hit of around $105,000, which means their retirement savings could run out six years can also be downsides when it comes to your career. Unlike a sabbatical, where you can take a break and come back to your same job, a mini-retirement often means you will have to find a new job when you return and won't be paid during your time off. Realistic Careers recruiter Tammie Christofis Ballis said taking a few months or even years off could backfire down the line when you're looking for a new job. "If you keep taking career breaks, it's not going to look good, because it looks like you're just going to pack up and go. Employers want longevity," she told Yahoo Finance. Ballis said employees could also risk seeing a dip in their salaries and face stiffer competition from those who have more recent experience. Perth financial planner Fran Hughes is a mini-retirement specialist and took her own mini-retirement last year. "We're working longer but also we're living longer and if we continue this trend, we might actually continue to work till age 70 and only have a short period of time that is 10 years to enjoy our golden years,' she told 9News. Last year, KPMG analysis found the average age of retirement in Australia was now 66.2 years for men and 64.8 years for women. Hughes said people seeking a mini-retirement may have to 'pay it forward and go without today' in order to achieve it. "The biggest planning mistake is not to plan it out," Hughes said.
Yahoo
6 days ago
- Business
- Yahoo
Aussie cafe owner's 'pressure' of impending $124,000 superannuation change: 'Everyone's struggling'
An Australian cat cafe owner says the introduction of payday super will 'add another layer of stress' to his small business, which is already grappling with rising rents, wages and operating costs. From July 1 next year, superannuation will be paid to employees at the same time as their salary and wages, rather than quarterly. First announced in May 2023, the reform is aimed at tackling unpaid super and increasing the retirement savings of Aussies. The Australian Taxation Office (ATO) estimates that $5.2 billion worth of superannuation went unpaid in 2021-22, while the government found a 25-year-old whose super was switched from quarterly to fortnightly could be $6,000 better off at retirement. Daniel McGowan runs the Lucky Cat Cafe in Ipswich and employs three part-time staff members. The 37-year-old told Yahoo Finance he was speaking with his accountant about how he can meet the upcoming superannuation requirements. He may have to reduce the hours of his staff and work behind the counter more himself to make sure he can juggle the added "pressure" on cashflow. RELATED $500,000 superannuation 'crisis' exposed as Aussie mum reveals retirement shortfall $1,130 ATO bill 'shock' after Aussie makes common tax return mistake Centrelink alert for 240,000 Aussie families as some see popular payment stopped 'I need to have that cashflow right here and now to put into the business to go straight into superannuation,' he said. 'I don't think this is going to hurt staff in that they're going to get less hours. But it is a consideration now, and I've spoken to them about it." McGowan said he generally doesn't pay himself a wage from his business, or pay himself superannuation, as he also works in digital marketing and teaches at a university. McGowan recently closed his Annerley cafe and has now shifted operations over to his Ipswich store and is in the process of building it back up. 'The way it is now is every single week is a new experience of, 'Where am I going to get this money? How am I going to pay this? How am I going to pay that?' It is a big struggle,' he said. McGowan said rent was his biggest expense, eating into between 60 to 70 per cent of revenue. This was followed by wages, with wages increasing on July 1 in line with minimum wage requirements and the super guarantee increasing to 12 per cent. The cost of goods has also been rising, with coffee bean prices 'going up every single month". On top of that, McGowan said he had to close the shop for a week due to Cyclone Alfred earlier this year, and the shop experienced a break-in. 'I just think everyone's struggling, so a week of revenue is actually a really big thing in the scheme of things,' he said. 'Anyone who wants to give you credit or a loan, these small business loan companies, they want to give you very short-term loans. 'So you're getting in this cycle of having to get a 20-week turnaround loan, which is high interest, to cover the fall, and it's a lot of juggling.' McGowan said he doesn't want to put up prices for customers at the cafe and cat lounge. He has been trying to keep prices steady for customers and absorb some of the small costs like alternative milk and EFTPOS fees. Employment Hero, who runs payroll for more than 300,000 businesses, surveyed its customers and found 65 per cent of small and medium businesses thought payday super would have a 'moderate' to 'huge impact' on the day-to-day running of their businesses. About a third said they would have to build up larger cash reserves to prepare for the change, while 15 per cent were not aware of the changes at all. Employment Hero CEO Ben Thompson said he supported the intent of payday super and thought it presented a 'huge opportunity' for all Australians, but there were risks for businesses at play. The company's modelling found businesses would need an extra $124,000 in working capital on average to meet the new rules. This is based on the average employer size and the average employee salary on its platform being paid 12 per cent of their salary in superannuation under the new timing requirements. 'That reduction in working capital could really push businesses to the edge of insolvency and put jobs at risk,' Thompson told Yahoo Finance. 'I think the problem here is more frequent payment of super is beneficial, but if it ultimately costs jobs, is it worth it?' As part of the payday super change, employers will have a seven-calendar-day deadline from the payment of wages to pay employees' superannuation. If they miss this deadline, they will be liable for an updated super guarantee charge, which will include the shortfall, daily interest (currently 10.78 per cent), and an extra enforcement charge of up to 60 per cent of the shortfall. The Council of Small Business Organisations of Australia (COSBOA) said it supports the principle of payday super but has argued businesses need more time before enforcing a strict seven-day rule. It called for a phased approach to payday super, moving to monthly payments from July 1, 2026, to allow time for system upgrades. 'Super payments move through multiple banking and clearing house stages before reaching super funds,' COSBOA Chair Matthew Addison said. 'At present, payments can take several business days to clear, and many transactions require additional time to reconcile.' Thompson has called for the payment deadline to be extended to 10 days to accommodate the likelihood of bouncebacks. The company is also in the process of building superannuation payments into a payroll solution. Other groups, like the Association of Superannuation Funds of Australia, have noted employers have known about the changes since 2023 and have had time to prepare. McGowan said he feels like he should have started preparing for the July 1 deadline earlier, but ultimately understands why the hard headline is in place. 'We're just gonna have to get it done,' he said.
