Superannuation and Investment Advice 2021

By Peter Vickers Business Group | superannuation, Investment, financial advice and planning |

And the BIG one for 1^st July 2021

Compulsory superannuation will rise from 9.5% to 10% from 1 July. This is based on wages paid from 1 July. So if the bonus for last year is paid after 1 July then the super rate becomes 10%.

This rate will now increase every year by 0.5% until 1 July 2025 when it reaches 12%.

When compulsory superannuation started at 3%, we calculated that it had to reach 15% to provide adequate retirement income if you commenced saving when you were 25 years old. So we still have some way to go.

How should you look at this if you are an employer or an employee?

To the employer this is an extra cost. You have to look at your employment contracts. Some are written as a package of salary and super and here legally the wage will go down by the extra super of 0.5%. On the other hand the contract may state wage plus statutory super and here the super goes up by 0.5% but the wage stays the same. However wages increase about 2% every year so instead of going up by this on 1 July it is likely to only go up by 1.5% and the other 0.5% goes into super.

For the employee, it is the reverse effect on their take home pay but they will be saving more for their retirement. Lots of room for industrial disputes and unhappy employees.

UPDATE ON SUPERANNUATION RATES AND THRESHOLDS FOR 2021/22

The ATO has published the key superannuation rates and thresholds for the 2021–22 year. Some of these rates and thresholds have been indexed following the average weekly ordinary time earnings figures released by the Australian Bureau of Statistics.

Concessional contributions cap is $27,500

Non-concessional contributions cap is $110,000
Capital Gains Tax cap amount for non-concessional contributions is $1.615 million
Div 293 tax threshold amount is $250,000
Maximum super contribution base is $58,920 per quarter
Maximum superannuation co-contribution entitlement remains at $500, the lower-income threshold increases to $41,112 and the higher-income threshold increases to $56,112
Low-rate cap amount is $225,000
General transfer balance cap is $1.7 million
Defined benefit income cap is $106,250
Employment termination payments cap amount for life benefit termination payments and death benefit termination payments is $225,000, and
Base limit of the tax-free part of genuine redundancy payments and early retirement scheme payments is $11,341, and for each complete year of service is $5,672.

And an after budget announcement: The current Covid inspired halving of the pension rate will continue for the next 2021/22 year.

INVESTMENT CLIMATE

Let’s learn from hind sight. The ASX 200 peaked on around 17 February 2020 at 7,139. It then started to go down and was not helped by the pessimism of the outbreak of Covid-19. It then bottomed on 16 March 2020 at 4,817. Then rose steadily till it is now about 7,200. In March last year everyone was talking about a world economic collapse.

If you held your portfolio since Feb 2020 you are no better or worse off. However if you panicked in March or wanted to play safe and sold then it is very unlikely that you bought in as the market started to climb. We have seen statistics that over a ten year period if you were not in the market on ten particular days then your shares would show only a very poor increase. What one learns from this is, you need to stay invested and ride the up and down roller coaster.

However this does not mean do nothing. You need to look at your portfolio at a minimum annually and put your shares into an order of future prosperity of the company and then replace the worst with a company that has better future prospects.

Share investing is not gambling. It is investing in an operating business run by fallible or talented human beings operating in a market place than will change. Investment in outdated technology like a petrol station is bound to cause you a loss.

Our greatest benefit to you is the advice that we can give you.

Yours sincerely

The team @ Peter Vickers Business Group

If you’d like more information on how these changes will affect you , or more broad advice on how to grow your Superannuation or Investment Portfolio, please contact one of our experts using the button below.

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