Super SA has announced important changes effective 30 November 2022, that provide exciting tax saving opportunities for members. Super SA is the compulsory super fund for most South Australian Government employees including health professionals and teachers.
While we expect these changes to provide significant tax savings for all members, we’re also anticipating new investment opportunities and for the first time – choice. It is therefore critical that each member considers what they need to do to take advantage of these changes.
The most significant change is that Super SA Triple S members will now be able to roll out to other super funds, even while continuing to contribute to Triple S. Previously, members could not roll out to other super funds unless they met certain criteria, such as being aged 60 or over or no longer working in the public sector. Therefore, if they wanted to roll their super into say a Self-Managed Super Fund, they couldn’t, but from 30 November they now can.
Most super funds have a $27,500 concessional contribution cap (the cap on tax deductible contributions). Super SA Triple S on the other hand has no concessional contribution cap, but instead has a lifetime cap which is $1,650,000 (2022-23). The ability to now roll out the majority of your balance out of Triple S each year means you could potentially salary sacrifice longer to Triple S.
Here is an example of how this works:
- Derek is a high earning neurosurgeon. His Super SA Triple S balance is $650,000. He contributes $100,000 per year, therefore he will reach the $1,650,000 cap in 10 years without earnings but likely seven years with earnings. (The cap does index but ignoring this for the example).
- If instead he rolls his $650,000 out to another fund and continues to roll out the $100,000 he contributes each year, he will have the full 10 years to contribute. Therefore, he contributes $1,000,000 instead of $700,000, saving an additional $51,000 in tax (average of 17% per dollar contributed) by being able to salary sacrifice longer.
Another major benefit of being able to roll out of Super SA relates to the way its earnings are taxed. Super SA Triple S is charged a flat tax rate of 15% on earnings. Other super funds can pay a much lower average rate of tax on earnings of closer to 10% due to franking credits and discounts on capital gains when investments are owned for more than one year. Therefore, rolling out to another fund may allow you to pay less tax on investment earnings in addition to providing you with more investment options.
Here is an example of how this works:
- Meredith’s Super SA Triple S account has investment earnings of $100,000, so she pays 15% tax which is $15,000.
- If instead Meredith invested in direct shares in another super fund, due to franking credits and capital gains discounts, she only pays an average 10% tax on the same amount of earnings, which is $10,000 and thus a $5,000 saving.
A key consideration is around the type of super fund you should roll into. This could include a Wrap style fund such as Netwealth or Panorama, an industry super fund or a Self-Managed Super Fund. The choice will depend on your individual circumstances and preferences. It is important that the new super fund’s investment performance is just as strong, if not better, which should be part of the decision-making process.
As you can see, this is a very significant opportunity for Super SA members and there are a number of strategies that can improve your retirement position.
Everyone’s circumstances are different, so it is important to seek advice first. If you are interested in reviewing your Super SA strategy, please contact myself, your existing advisor or a member of the William Buck team.
