IMPORTANT INFORMATION FOR ADVISERS
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This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468
(Colonial First State) based on its understanding of current regulatory requirements and laws as at 3 June 2015. While all care
has been taken in the preparation of this document (using sources believed to be reliable and accurate), to the maximum
extent permitted by law, no person including Colonial First State or any member of the Commonwealth Bank group of
companies, accepts responsibility for any loss suffered by any person arising from reliance on this information.
This document does not take into account any person’s individual objectives, financial situation or needs. You
should read the relevant Product Disclosure Statement (PDS) before making any recommendations to a client.
Clients should read the PDS before making an investment decision and consider talking to a financial adviser.
Nearing retirement: a checklist
While retirement may still seem a while off you may find that time goes quickly. After all,
the chance to say yes to new challenges and enjoy a life away from work is just around
the corner. This means that now is the time to get your plan into gear so that you can
achieve your retirement goals.
Australians are living longer than ever before1, so it’s important to look at how much
super you have and consider how long you may need it to last. ASIC’s MoneySmart
superannuation calculator helps you work out how much super you’re likely to have
when you retire.
From boosting your super to working out how you’ll access your money when you retire,
a checklist can help you get ready for what’s next.
1. Think about the tax implications of accessing your super at certain ages
You may pay tax if you draw down your super before you turn 60. All your super
withdrawals are tax-free after the age of 60.2
2. Think about the best way to access your super that suits your needs and
circumstances

Transition to retirement (TTR) – This allows you to keep working full time or
reduce your working hours while you draw down part of your super via a
transition to retirement pension.

Account based pension – This is a regular income stream, purchased with money
you have accumulated in super. If you’re aged between preservation age and 60,
you get a 15% tax offset on any taxable income, and payments are tax free if
you’re 60 or over.
Investment earnings in superannuation pensions are tax free, but something to
keep in mind is that the balance is affected by market performance.

Annuities – You can use some or all your super to purchase an annuity, and
receive a series of guaranteed payments for a period of time (eg, for the rest of
your life) regardless of what’s happening in the market.
Annuities are often used in conjunction with other sources of retirement income
1
The Australian Government Treasury, Intergenerational Report, March 2015.
Correct at 17 August 2015 and does not apply to untaxed funds such as the Commonwealth Government
Sector Super Scheme
2
(such as an account-based pension and the Government’s Age Pension) to
provide a balance between a dependable source of income and the potential
benefits from market-linked investments.

Government Age Pension – This provides a safety net if you can’t afford to fund a
basic retirement and have reached age pension age (currently 65). The amount
of Age Pension you receive will depend on your income and assets.
Note that a significant change will occur to the assets test from 1 January 2017,
which may see certain people’s Age Pension reduce or completely cut off.
3. Look for lost super and roll it into one super fund
You may have forgotten super accumulated from your past jobs – you can find it
down using the ATO’s SuperSeeker tool (you’ll just need your Tax File Number).
Then you can roll your super into the one super fund which will help you avoid
paying multiple fees.
Keep in mind that if you switch funds, there are exit fees, investment and tax
implications and impacts to existing insurance arrangements to consider. Speak
to a financial adviser if you’re unsure.
4. Salary sacrifice
This is where you sacrifice some of your before-tax income to your super. It’s a
tax-effective way to top up your super as these contributions are generally taxed
at just 15%, which could be lower than your income tax rate.
Salary sacrifice contributions, along with your employer’s Super Guarantee (SG)
contributions and personal tax-deductible contributions (if you’re eligible) are
known as ‘concessional contributions’. For the financial year ending 30 June 2016
concessional contributions are capped at $30,000 if you’re under 50 and
$35,000 if you’re 50 or over3 at any time during the financial year. If you go
over these limits, the excess will effectively be taxed at your marginal tax rate
(plus an interest charge).
5. Make non-concessional (after-tax) contributions to super
These contributions come from sources where tax has already been paid, such as
your savings. Non-concessional contributions are capped at $180,000 each year
before a 49% tax rate applies to excess contributions, although you can normally
withdraw any non-concessional contributions that exceed the limit.
Note that any excess concessional contributions (unless withdrawn) will be
counted towards your non-concessional contributions cap.
6. Take advantage of the ‘bring forward’ rule before you turn 65
The bring forward rule is where you can roll three years’ worth of nonconcessional contributions into one year without any tax penalties, meaning you
can make a non-concessional contribution of up to $540,000. This could be useful
if you have a lump sum to contribute such as from the sale of an investment
property.
3
A higher cap of $35,000 applies if you were aged 49 or over at 30 June 2015
You can only use the ‘bring forward’ rule if you are younger than 65 sometime in
the financial year, so make sure you plan ahead. You must satisfy the work test
requirement if you make the contribution on or after you turn 65.
Concessional
(pre-tax)
$30,000 pa
Under 50
Contribution caps
Non-concessional
(after-tax)
$180,000 pa
OR
$540,000
65 to 74
If under 65
(over three financial years)
$35,000 pa
50 or over
7. Plan ahead for the next few years
You might be thinking about downsizing or making a sea change, so consider how
much money you’ll need to set aside to pay for moving costs and understand how
selling a property might affect your eligibility for the Age Pension.
8. Create your estate plan
Estate planning is understandably something we don’t like to contemplate,
however it’s one of the most important things you can do to protect your family’s
interests. A good estate plan is tax-effective and ensures your assets are
distributed according to your wishes.
As part of your estate plan, you’ll need to:





Have an up to date Will.
Make a Binding Death Benefit or Non-Lapsing Binding Death Benefit
nomination for your super. This lets your super fund know who you want
your death benefit to go to.
Nominate a beneficiary for proceeds of life insurance policies you have
outside super.
Know the tax consequences of how your assets are distributed.
Appoint an enduring Power of Attorney and an enduring Guardian if you
think you might need someone to legally act on your behalf if you lose
your capacity to make decisions.
9. Get ready for life after work
From volunteering, taking up a hobby and spending time with grandchildren to
studying and starting a small business, retirement gives you the opportunity to
do the things you’ve always wanted, as well as things you never thought about
doing before.
If you’d like to ease into retirement, you may be able to use a transition to
retirement strategy that lets you start drawing down your super while you reduce
your working hours. Alternatively, you could use this strategy to start increasing
your voluntary super contributions while you’re still working full time.