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The aftermath of the Covid era signals a return to normalcy for superannuation rules, with another temporary Covid measure ending on July 1 this year. The cessation pertains to minimum income stream payments, which have now reverted to their 2019 levels.

Upon retirement, individuals often opt for an ongoing ‘account-based’ income stream, distributed over several years rather than a lump sum immediately upon retirement. In this context, we refer to these continuous payments as ‘income streams’ to avoid confusion with Centrelink pensions.

Selecting an income stream brings forth various advantages, particularly for retirees over 60. Opting for an ongoing income stream exempts earnings on the remaining super funds from taxation, a measure designed to encourage sustained income streams and discourage early lump sum withdrawals.

To prevent abuse of this tax advantage, the Commonwealth mandates retirees using an income stream to withdraw a minimum amount annually. The minimum withdrawal varies with age, increasing as retirees grow older.

During the 2019-20 year, these minimum amounts were reduced by 50%, and this reduction persisted until June 30 this year. However, from July 1, 2023, the minimum amounts have reverted to their pre-reduction levels, outlined in the table below:

Providers may not necessitate a set percentage, allowing retirees flexibility to adjust the annual withdrawal based on circumstances, especially for those managing their own super fund.

Our experience indicates a tendency for retirees to be cautious in the early stages of retirement, often opting for the bare minimum, such as 5% for a 65-year-old retiree. However, withdrawing a minimal percentage ensures the existing super lasts for more than 20 years. While this seems prudent, it’s crucial to consider that super remains invested, potentially earning returns even as withdrawals occur.

This presents an opportunity for retirees to enjoy their initial retirement years more by withdrawing an amount larger than the minimum. If investment earnings exceed the minimum withdrawal rate, the super balance can actually increase each year.

However, retirees may choose to withdraw an amount that utilizes both the investment earnings and draws down some capital each year. While this may result in a declining super balance, it aligns with the purpose of funding retirement without the need for super to last as long.

Living expenses tend to decrease in later retirement years, making it feasible to enjoy more discretionary spending earlier in retirement, such as travel.

Feel free to consult with us regarding the optimal annual withdrawal in your retirement. You may find our recommendations suggest a slightly more indulgent approach than initially planned!

The latest Federal Budget introduced by the new Federal Government has unveiled noteworthy changes, particularly for those contemplating the purchase of electric cars. While a comprehensive analysis of the Budget is forthcoming in the coming weeks, we find it pertinent to highlight a key announcement that may impact you directly, especially if you are considering acquiring an electric vehicle.

The Budget features what is termed as the Electric Car Discount, encompassing two significant components. Firstly, imported electric cars will no longer be subject to a 5% import tariff, resulting in a direct reduction of the sticker price by 5% upon implementation of these changes.

The second element, and arguably more impactful, pertains to the exemption of fringe benefits tax (FBT) for electric vehicles. Typically, businesses incur FBT when providing employees with cars for personal use, presenting a substantial deterrent for companies offering company cars. FBT calculations, intricate in nature, reveal that a $50,000 car could generate over $9,700 in FBT for the fiscal year 2022/2023. The removal of FBT for electric vehicles, given the starting price of around $50,000, significantly influences this equation.

This change carries two noteworthy implications. Firstly, employers offering cars to their employees now have a compelling incentive to opt for electric cars over traditional petrol or diesel-fueled alternatives. Secondly, more employers may find it attractive to provide cars to their employees, thereby potentially broadening the adoption of electric vehicles.

It’s important to note that many self-employed individuals utilising a company or trust structure likely qualify as employees of the respective entity. This shift can be advantageous for a considerable number of business owners.

The anticipated outcome is a twofold impact: a potential reduction in the cost of new electric cars due to the elimination of the import tariff and an increase in their availability attributed to the exemption of FBT. As the prevalence of electric cars rises, so too will societal acceptance, thereby fostering increased demand. Additionally, the Commonwealth has announced plans for an expansion of charging stations, and there will be heightened incentives for private entities to contribute to the necessary infrastructure for electric vehicles.

This shift may also extend to the second-hand market as a growing number of used electric cars become available over time. This development is crucial, as currently, second-hand electric cars command a premium compared to their non-electric counterparts.

Please make sure you speak to us prior to purchasing an EV for optimal tax effect.