As of July 1, the biggest changes to superannuation in a decade came into effect. These changes will have a significant impact on a persons ability to save for the future and therefore everyone should review what they are doing when it comes to contributing to super. Now it may make a lot sense for people to start contributing extra money to super, however the decision to do so is a complex one. The list below is just an example of some of the issues people should consider before implementing any such strategy:
- Household cashflow needs – the commencement of a salary sacrifice arrangement will more than likely see your weekly/fortnightly or monthly take home pay reduce. The question that needs to be asked is – will your household be able to function i.e. meet mortgage repayments / education costs / food & grocery needs / pay utilities etc. with this reduced income?
- Loss of access to the funds – superannuation funds can only be accessed when the member meets a “condition of release”, typically retirement from the workforce, and therefore a person should be careful not to “lock up money” inside super.
- Legislative risk – as the recent changes have shown, governments of both persuasion, Liberal & Labor, have a long track record of “changing the rules of the game” whenever they feel it to be appropriate and therefore need to take this into consideration when investing for such a long period of time.
With all that said, Superannuation is still the most tax effective environment when it comes to saving for one’s retirement just be aware of the impact that this may have on you and your family, both now and in the future.
18 July 2017