Are you paying unnecessary tax on your super? Here’s how to stop it

As we navigate the golden years of retirement, managing our finances becomes more crucial than ever. For many Australian retirees, superannuation is the cornerstone of their financial security. However, recent findings suggest that a significant number of retirees could be inadvertently diminishing their nest eggs by paying unnecessary tax on their superannuation balances. 

The Super Members Council (SMC) has shed light on a concerning trend: approximately 700,000 Australians over the age of 65 are still holding their super in accumulation accounts. This oversight could be costing retirees dearly, with potential tax implications that could see thousands of dollars unnecessarily drained from their retirement funds.

Save up to $9,000 by avoiding unnecessary super tax. Image Source: Peggy_Marco / Pixabay

For instance, a retiree with a $100,000 balance in an accumulation account, rather than a pension account, could be paying as much as $4,500 in super tax. This figure leaps to a staggering $9,000 for those with $200,000 tucked away in their accounts. When you consider that the average super balance for men aged between 65-69 is $453,075, and $403,000 for women in the same age bracket, according to the Australian Taxation Office (ATO), the scale of the issue becomes clear.

The SMC has voiced its concern that many older Australians have not received the ‘basic advice’ necessary to transition their super into the tax-free retirement phase. Misha Schubert, CEO of the Super Members Council, emphasises the importance of being informed: ‘Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning,’ she says. ‘Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle.’

Research by the SMC found that 39 per cent of retirees who leave their funds in the accumulation phase do so out of ignorance, simply ‘because they don’t know what to do with it’. Moreover, only 26 per cent of current retirees have sought financial advice from their super fund. This is a concerning statistic, especially when considering that four in five Australians aged 45 to 54 acknowledge the need for advice but find it unaffordable.

The Australian government’s proposed financial advice reforms, part of Labor’s ‘Delivering Better Financial Outcomes’ package, aim to bridge this information gap. While this package is still awaiting legislation, its goal is to ensure that all Australians have access to quality and affordable financial advice. It also seeks to empower super funds to provide better guidance to members at key life stages, offering personalised prompts to support retirement planning.

If you’re nearing retirement, it’s crucial to review your superannuation arrangements. Are you paying unnecessary tax on your super? Taking action now, like seeking financial advice, could help ensure your super works as hard for you as you did for it. The decisions you make today can have a lasting impact on your retirement lifestyle.

Have you checked your super lately? Share your experiences and tips below to help others optimise their retirement funds.

Also read: Boost your superannuation with the government’s co-contribution scheme

Abegail Abrugar
Abegail Abrugar
Abby is a dedicated writer with a passion for coaching, personal development, and empowering individuals to reach their full potential. With a strong background in leadership, she provides practical insights designed to inspire growth and positive change in others.

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