Looking now at the reasons why you should top up your retirement, the inability to access your retirement due to conservation rules should not be a concern.
Super will be fully accessible
Under current rules, if you’re over 65, your retirement will always be fully accessible, whether you’re still working or retired.
The biggest question will come down to taxes. In other words, are you better off from a tax perspective if you invest these extra cash savings in a retirement setting or in your personal name?
Looking at the retirement environment, the key tax arbitrage will be whether you can convert these personal contributions into a pension. If you can, then there is no better tax outcome as taxable income will be taxed at zero and all withdrawals after age 60 are tax-free.
However, if the contribution is forced to remain in the accumulation account, since you have already maxed out your transfer balance limit, then you are better off investing these additional savings in your personal name.
In a retirement setting, taxable income related to your accumulated balance will be taxed at 15 percent from the first dollar.
Invest personally or in super?
By comparing that investment in person, you can earn up to
$18,200 in investment income each year as an individual before you start paying taxes.
For a couple earning no other income representing $36,400 in tax-free income.
Looking at a comparison between investing personally versus investing in a retirement, since you pay a 15 percent tax on investment earnings from the first dollar with an accumulation savings account, you could earn up to about $50,000 in investment income at your personal name without any other input before. its average tax rate reaches 15 percent.
If you equate that with an amount of capital earned by a
average 5 percent per year, which means the break-even point is about $1 million.
If you can add this amount to your retirement as a personal contribution, this obviously won’t be possible in a single lump sum and will take several years given the annual contribution limits.
There are other important factors to consider, such as Centrelink and the mix of investments you want to implement with these additional savings.
For example, the use of investments with postage credits provides a credit for the tax paid at the corporate tax level. When your marginal tax rate is lower, you will be entitled to a tax credit, which can be repaid in cash to the investment entity where postage credits result in a tax refund.
With any rule change, there is often a call to action.
The new contribution eligibility rules certainly simplify the analysis now if the proof of work rules apply when adding after-tax personal taxes.
However, the analysis from a tax perspective isn’t as clear cut, and in fact, you’re better off investing in your personal name if you can’t add those personal contributions to a new pension account in your retirement fund.