Glossary

Here is a list of the most common terms.

Account based allocated pension

An account based allocated pension provides a regular income from a superannuation fund. A person can nominate the amount of income that suits them but they must take at least a minimum pension amount as set by the government. An account based allocated pension provides flexibility as the income may be changed and lump sums can be withdrawn.
However income payments only continue until the account balance is depleted – income from these types of income streams are not guaranteed.

The value of the investment depends upon: the original amount invested; the market-linked investment earnings; fees and charges; and the amount of income withdrawn from the account. Income payments may be increased in line with inflation changes.

Benefits of investing your superannuation into an allocated pension:

  • If you are under age 60, the portion of your income that relates to your tax free component will not be subject to tax. The balance of the income will be taxable, but if you have reached preservation age, you will receive a 15% tax offset on this taxable amount (element taxed).
  • Income payments from a taxed superannuation fund you receive on or after reaching age 60 will be completely tax free and will not need to be included in your tax return.
  • Earnings within the fund are tax free.
  • Income levels may be adjusted (above government minimum levels) to suit your changing needs.
  • Lump sum commutations are available.
  • When you die, the remaining value of the pension can revert to your spouse (and certain other dependants), or lump sum payments can be made to eligible beneficiaries. Where the dependant is considered a tax dependant (eg spouse), this lump sum is generally tax free.
  • A portion of your income that relates to a return of your capital won’t be counted as income under the Centrelink income test.

Aggressive investor/aggressive investment mix

The investor’s objective is to achieve high long-term growth. They are prepared to accept higher risk and volatility of returns in exchange for greater long-term returns.

AMP accredited financial planner

In addition to professional financial planning qualifications, all AMP planners complete an AMP accreditation program as part of their ongoing professional education. AMP planners complete the accreditation assessment annually.

Assessable Income

Gross income including salary and wages, dividends, interest and rent before any deductions are allowed. Assessable income also includes net capital gains, Eligible Termination Payments (ETP) and other amounts that are not ordinarily classed as income.  Source: Australian Taxation Office (ATO)

Assets

FIDO, Australian Securities & Investments Commission’s (ASIC) consumer website, defines assets as ‘The resources owned by a company, fund or person. Assets can be tangible, e.g. cash, investments, property and equipment, or intangible, for example goodwill, patents.’

Australian Bureau of Statistics (ABS)

The central statistical authority for the Australian Government. The ABS provides the official national source of statistics for use by the government and the community.

Australian Securities & Investments Commission (ASIC)

The Australian Securities & Investments Commission (ASIC) is an independent Australian  government body that regulates financial markets, securities, futures and corporations. ASIC enforces and regulates company and financial services laws to protect consumers, investors and creditors.

Average Weekly Ordinary Time Earnings (AWOTE)

Average weekly ordinary time earnings – a measure of average wages used by the Australian Bureau of Statistics.

Balanced fund

A fund or portfolio that invests across major asset classes ie cash, fixed interest, property and shares, domestically and internationally. It provides long-term capital growth and a reasonable level of  income.

Balanced investor/balanced investment mix

The investor’s main objective is to achieve balanced returns to meet their medium to long-term  financial goals. They are prepared to accept some risk and some volatility of returns to achieve their long-term goals.

Before tax annual income for individuals

Before tax annual income is assumed to be:

  • For salaried employees with no business ownership interest, this will be your current total annual salary package.
  • For salaried employees with a business ownership interest, this will be your current annual salary package plus or minus your share of the business’ latest financial year profit or loss (before tax and after expenses).
  • For partners in a partnership, this will be your drawings plus or minus your share of the partnership’s latest financial year profit or loss (before tax and after expenses).
  • For sole proprietors, this will be the gross business income, less the cost of goods sold and less all tax deductible business expenses.

Business overheads

Business overheads insurance generally provides a reimbursement of up to 100% of the fixed and ongoing expenses of your business that you are responsible for if you are unable to work due to illness or injury, and meet the policy conditions for payment. It is important to understand how this policy works. Here are some features to be aware of.

Capital gains tax

Here is some information on capital gains tax (CGT):

  • CGT is typically payable on a capital gain made on disposal of an asset which was acquired on or after 20 September 1985.
  • An asset is generally acquired when a person buys it, inherits it, constructs it or receives it as a gift.
  • An asset is generally disposed of when a person sells it, gives it away or when it is lost or destroyed.
  • Individuals will generally only pay capital gains tax on half of the realised nominal (unindexed) capital gain if the asset is owned for at least 12 months.
  • For investments acquired between 20 September 1985 and 21 September 1999, personal investors have a choice when calculating their CGT. Either the new method (50% of the nominal gain taxable at marginal tax rate) or the previous model (indexation) can be used, however CPI indexation has been frozen at the 30 September 1999 level.

You should obtain specific taxation advice from your accountant before implementing our advice or redeeming your investments.

Capital losses

Capital losses (the difference between the disposal price and the reduced cost base) can only be offset against capital gains. If your total capital losses for the year are more than your total capital gains, the difference is carried forward until it can be offset against future capital gains.
It follows that efforts should be made to offset capital losses against capital gains as quickly as possible, as the value of the loss diminishes over time with inflation. Where a capital gain is made in an income year, disposing other assets (with a capital loss) could be considered.
You should obtain specific taxation advice from your accountant with respect to the application of capital losses

Concessional contributions

Concessional contributions include:

  • employer contributions (including contributions made under a salary sacrifice arrangement)
  • personal contributions claimed as a tax deduction by a self-employed person.

Conservative investor/conservative investment mix

The investor’s main objective is to achieve stability in their portfolio. They are prepared to accept lower returns in exchange for maintaining low risk and capital stability to achieve their goals.

Contributions

Money paid into a superannuation fund. There are three types of contributions.

  • Superannuation Guarantee Contributions (SGC) made by your employer. By law, SGC contributions are currently 9% of your annual income and increasing to 9.25% on 1 July 2013.
  • Pre-tax contributions: additional personal contributions that you make to boost your SGC contributions (also known as salary sacrifice).
  • Undeducted contributions: post-tax personal contributions that you make, e.g. a lump sum contribution from the sale of an asset (also known as after tax contributions).

Debentures

  • Income producing investments generally have the advantage of high security. These investments include debentures with major finance companies, bank deposits, mortgage investments, cash management trusts etc.
  • The disadvantage of interest bearing investments is the taxation liability on the income produced. For example, if you were to earn 8% per annum on an interest bearing investment and your marginal tax rate was 30%, the return would only be 5.6% per annum.
  • Therefore, income-producing investments provide good security, but very low real rates of return, even a negative result in some cases. Additionally, most income producing investments provide no capital growth to protect against the effects of inflation.
  • A debenture is a loan security issued by a company and is secured by a charge over the assets of the company. The investor receives a guaranteed rate of interest and repayment of capital at a specified date in the future. The earnings rate reflects the credit rating of the company. The higher the potential yield the greater the risk.

Defensive assets

Assets that typically provide lower levels of risk than other assets. The trade-off is usually lower returns over the long term. An example of a defensive asset is investing in cash.

Diversification

The process where funds are spread across classes of assets, geographies and managers to distribute and control risk. As a result, the return on the portfolio as a whole varies less than the return on  smaller lots of individual holdings.

Dollar cost averaging

Regular investment has been proven to be one of the most effective ways of achieving financial goals. With dollar cost averaging, you can build assets by setting aside funds at regular intervals regardless of market conditions. This will enable you to buy assets at different prices and provide you with the opportunity to buy more of an asset when prices are low, and less of an asset when prices are higher. This can ultimately tend to reduce the average cost of your investment. In addition, the power of compounded growth when you reinvest distributions can dramatically improve your earnings potential.

Dollar cost averaging works best in a falling or a volatile market over a long period of time. Although this strategy will not guarantee a profit (particularly if you have to sell at a bad time) and bigger gains are possible by investing a lump sum, dollar cost averaging is a highly effective way to reduce the risk of investing at a bad time.

Early retirement scheme payment

A payment made under a program put in place by an employer may qualify as an early retirement scheme payment if these conditions are met:

  • The scheme is offered to all employees in a class identified by the employer.
  • The scheme is entered into with a view to rationalising or reorganising the employer’s operations with specific objectives.
  • The Commissioner of Taxation has formally approved the scheme as an approved early retirement scheme prior to its implementation.
  • In order to receive concessional tax treatment:
  • The payment must generally be made before the person’s 65th birthday.
  • The payment is not from a superannuation fund – it must be paid directly from the employer.
  • Upon termination, there must not be any agreement between the employer and the employee, or between the employer and another person, to employ the person after that time.

FIDO

FIDO is the consumer website of the Australian Securities & Investments Commission (ASIC).

Future dollars

‘Today’s dollars’ is what an item or goal costs today. ‘Future dollars’ is an expression used to indicate the future cost of the same item or goal eg retirement. The cost of the goal is adjusted to reflect the increase in the price of items over time due to inflation. It is an estimate based on current information.

Genuine redundancy payments

A genuine redundancy occurs when a job or position is no longer required and, as a result, the person currently filling that position is terminated. The employer must have initiated the termination.

Termination payments made under a genuine redundancy are afforded concessional tax treatment. Amounts that are potentially eligible for concessional tax treatment include:

  • Payments for unused annual leave and unused long service leave.
  • Any employment termination payment amounts (including sick leave), that exceed the amount that would otherwise be payable if the person merely retired or resigned. This amount is often called the redundancy payment, but can also be referred to as a golden handshake, ex-gratia payment or retrenchment package.

In order to receive concessional tax treatment:

  • The payment must generally be made prior to the person’s 65th birthday.
  • The payment is not from a superannuation fund, it must be paid directly from the employer.
  • Upon termination, there must not be any agreement between the employer and the employee; or between the employer and another person, to employ the person after that time.

Government co-contributions

An Australian Government initiative to assist eligible individuals to save for their retirement. You may be eligible for the government co-contribution if you are:

  • make personal after tax super contributions to a complying super fund
  • an Australian resident
  • 10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of both
  • You earn less than $61,920 a year
  • If you are eligible for the co-contribution, the government contributes  up to a maximum co-contribution of $1,000 a year.

Growth assets/growth investment mix

Assets that typically provide higher levels of risk than other assets. The trade-off is usually higher returns over the long term. An example of an aggressive asset is international shares or property.

Immediate annuities

An immediate annuity involves an exchange of a lump sum in return for a guaranteed income stream. Income is paid at pre-determined intervals, at a pre-determined rate, for a set period of time or for life. The pre-determined rate depends on: the value of the initial lump sum; your age; and whether you want to receive a return of capital at the end of the term.
The interest rate on immediate annuities can vary and depends on the current rate at the time of investment. However, once the investment is made, you are guaranteed how much, and when, you will be paid, and how long regular income payments will last.

Immediate annuities can be purchased with either superannuation or non-superannuation money.

Imputation credit

Taxation credits shareholders may be entitled to when they receive franked dividends.

Income protection

Income protection insurance generally provides a regular income while you are unable to work due to illness or injury, and meet the policy conditions for payment. The maximum level is typically 75% of your wage. This lessens the need to draw on other sources such as your savings; home equity or relying on government benefits such as Centrelink.

Inflation

An increase in the volume of money and credit relative to available goods and services, resulting in a continuing rise in the general price level.

Insurance bonds

Insurance bonds, or investment bonds, are life insurance policies where the surrender value usually equals the account balance. However, some insurance bonds have a small amount of life cover that would be paid in addition to the surrender value. An insurance bond investment usually involves only a one-off initial payment however, in some cases, additional top up payments are allowed.

One of the main advantages of these types of investments is the favourable taxation treatment they receive. The investment earnings within Australian insurance bonds are taxed in the hands of the insurance company at a maximum rate of 30%. This rate can be further reduced by dividend imputation credits and other offsets.

An investor in insurance bonds can select from a wide range of investment options from capital guaranteed and cash through to international shares or growth funds.

Investment mix

The mix of assets your money is invested in to achieve your financial objectives. The mix is based on the time you have to achieve your objective and your risk tolerance.

Investment strategy

An investment strategy is the combination of assets you invest in to achieve your goals within the timeframe you specify. The appropriate strategy will depend on your goal, the length of time you have to achieve the goals and your tolerance for risk (that you might lose money as well as grow your money). A professional adviser can analyse these considerations and recommend the right strategy for you.

Investor profile

Also known as risk profile. An individual’s or an investment manager’s willingness to trade off the risk of losing money in exchange for higher returns over time.

Life insurance

Life insurance pays a lump sum on the death of the life insured whilst the cover is in place. Many policies also pay in the event of terminal illness. By getting adequate life cover, you can make sure your debts will be repaid and dependants supported if you die prematurely.

Line of credit

A line of credit is a facility offered by most financial institutions. A line of credit enables investors to borrow against equity in their property. Interest is only charged on the amount actually drawn, and the interest payments will be tax deductible if the loan is invested to derive taxable income. A line of credit can be used like a bank account in that your funds are accessible and deposits can be made to the account.

A line of credit must be managed carefully. Irresponsible use of the funds for lifestyle purposes may result in a borrower wasting away hard earned equity in their property. Using the line of credit correctly requires discipline and control.

Loan to value ratio

A loan to value ratio (LVR) is the ratio of debt to equity when establishing a gearing loan. For instance, a client who may have $60,000 to invest may wish to borrow $100,000 for additional investment purposes. The LVR in this case would be $100,000: $60,000 or 62.5%:37.5%.

As the client’s equity is held as security over the loan, the LVR must remain within agreed parameters by the lending institution otherwise a margin call is made. Generally the LVR must be within a 75%:25% ratio, however, it is advisable to build in a buffer against any market fluctuations. Therefore we recommend no more than a 80%:20% LVR. While the buffer aims to reduce the likelihood of a margin call, you still may be required to pay off some of the loan or increase your own equity (to reduce the loan to value ratio within the set limits).

Long-term

Generally, a period of five years or more.

Long-term investment

An investment that generally matures in more than five years or is to be made over a period of five years or more.

Lump sum contributions

An amount of money paid into your superannuation fund in one payment. It can be a before or after-tax payment.

Management fee

The fees and costs for managing your product, specifically the amount you pay for specific investment options. This is money paid to the investment manager for managing your money.

Margin calls

Once a margin loan has been provided, you must meet the repayment obligations and maintain the loan within the agreed loan margin. (The loan margin is the ratio of amount borrowed to the total value of the investment). If the loan margin ratio exceeds the agreed upon limit, then you will be faced with a margin call. If you receive a margin call, you will either have to pay off some of the loan or increase your own equity. Both these approaches will reduce the loan to value ratio to within the set limits.

A margin call occurs when the market value of your security falls. This results in the loan to valuation ratio exceeding the allowable limits. Margin lenders usually require the loan to valuation ratio to be restored to the agreed limits within a stated time, generally within 24 hours. By borrowing less than the maximum loan limit, you minimise the risk of a margin call.

Margin loans

Margin loans are where a financial institution lends an investor a percentage of the market value of the investments nominated by the investor and approved by the financial institution. The difference between the market value of the investments and the amount of the loan is the margin. The investor must contribute the margin.

Market

An environment which is organised to facilitate exchange of products and services between buyers and sellers.

Medicare Levy

A charge of 1.5% paid by resident taxpayers to fund the Australian national health system, known as Medicare.

Medicare levy surcharge

Higher income individuals and families, who do not have appropriate levels of private patient hospital insurance, could pay up to an extra 1.5% of their taxable income plus reportable fringe benefits towards the Medicare levy surcharge.
This is in addition to the normal 1.5% Medicare levy and is based on their level of income for surcharge purposes.
Income for surcharge purposes includes:

  • Taxable income.
  • Total net investment loss.
  • Reportable superannuation contributions.
  • Reportable fringe benefits.
  • Less: Taxable component of superannuation withdrawn within the low rate cap which attracted the offset reducing tax to nil.

Member

An individual who contributes to a superannuation plan.

Moderately aggressive investor

The investor’s main objective is to accumulate assets by targeting capital growth over the medium to long-term. They are prepared to accept higher volatility and moderate risks to achieve these returns.

Moderately conservative investor

The investor’s main objective is to maintain relatively stable returns. Capital stability is still a priority, however, they are willing to accept some volatility to achieve these returns.

Non-concessional contributions

The Australian Taxation Office describes ‘non-concessional contributions’ as contributions that are made from a person’s after-tax income. The terms ‘non-concessional contributions’, ‘post-tax contributions’ and ‘after-tax contributions’ are often used interchangeably. Source: Australian Taxation Office (ATO).

Personal contributions

Contributions made by an individual to their superannuation fund. For employees, personal contributions are amounts put into superannuation over-and-above the compulsory superannuation guarantee contributions (SGC) that an employer makes on behalf of the employee. Contributions can be made using before or after-tax money.

Power of Attorney

A Power of Attorney is a document whereby one person appoints another to perform certain tasks on their behalf.

There are 2 basic approaches to Powers of Attorney:

Non-enduring Power of Attorney.
Enduring Power of Attorney.

A Non-enduring Power of Attorney can be set up so the attorney can cover a specific event for a fixed period of time. For instance, it can be granted for the duration of your absence (for example, if you are going overseas).

If you’re going to be absent from your normal place of residence for a considerable period, you may want to consider who will look after your financial affairs. Given that you can limit the powers granted under a Power of Attorney, you may wish to grant a close relative a limited Power of Attorney to look after your financial affairs whilst you are away.
Non-enduring Powers of Attorney become invalid if the person who granted the power becomes mentally incapacitated.

An Enduring Power of Attorney is suited to looking after the financial affairs of a person when they are not in a position to look after their affairs themselves. Unlike a general Power of Attorney that stops once a person who granted the power becomes mentally incapacitated, an Enduring Power of Attorney continues to operate when a person becomes mentally incapacitated. However, in most states, an enduring power of attorney does not allow the attorney to make lifestyle and medical decisions for the donor. This would be covered in most states by appointing an Enduring Guardian.
Granting an Enduring Power of Attorney can help to make sure your financial affairs are handled on your behalf should anything happen to you.

Because of its legal effect, an Enduring Power of Attorney can only be signed after obtaining the advice of a solicitor.

Preservation age

The age at which a person may acquire access to accumulated preserved superannuation benefits.

Product Disclosure Document (PDS)

An offer document for a financial product. It contains information that a person would reasonably require to make a decision to acquire a financial product. This includes information about the product features, fees that apply, any adviser commission, benefits and risks of investing and what to do if you have a complaint.

Projections

An estimate of the outcome of an event or situation (such as a financial outcome) based on a specified set of conditions, specific data or trends.

Real rate of return

The rate of return on an investment in excess of inflation. For example, if the rate of return is 10% but the inflation rate is 3%, the real return is 7%.

Rebate

An amount of money refunded to an individual if a particular event occurs or a condition is fulfilled. or example if someone’s superannuation balance exceeds a specified amount.

Return

The total earned from an investment including capital growth, or loss, and income.

Reverse mortgage

A reverse mortgage is a loan, which enables asset rich, cash poor individuals to access the equity in their home without selling their homes.

The reverse mortgage is aptly named because the payment stream is reversed. Instead of making monthly payments to a lender, as with a regular mortgage or home equity loan, the lender makes payments to the client.
The loan proceeds may be taken as a lump sum, fixed periodic payments or a combination of these. Generally the funds can be used for any purpose.

As in a regular mortgage the property is collateral for the loan with the difference being that repayments on the loan are not required and interest plus fees are added to the loan.

Generally, the total amount owing (ie borrowed amount plus interest and credit fees and charges) become due if the borrower/s:

Dispose of the home.
Move out of the home.
Is in default of the loan contract; or
Dies.

Risk

In investment terms, risk is a measure of the volatility of returns.

Risk profile

Also known as investor profile. An individual’s or an investment manager’s willingness to trade off the risk of losing money in exchange for returns over time.

Salary

An amount paid to someone in exchange for services e.g. money in exchange for work services.

Salary sacrifice

When an employer makes contributions into a super fund from an employee’s salary before deducting Pay As You Go (PAYG) tax. The contributions are made at the employee’s request. The employee’s contribution is maximised by using pre-tax dollars and the fund is taxed at only 15%, instead of your marginal rate of up to 45% plus 1.5% Medicare levy.

Self managed super fund

A self-managed superannuation fund must meet all of the following broad requirements:
There is a maximum of 4 members at any one time.

All members are trustees (or directors of a corporate trustee) and there are no other trustees/directors (except for a single member fund).
No member of the fund is an employee of another member of the fund, unless the members concerned are relatives.
No trustee or director of a corporate trustee receives any remuneration in respect of duties or services as trustee of the fund.

To remain a complying superannuation fund (and be eligible for tax concessions), a SMSF must also meet the requirements of an Australian superannuation fund for the entire year.

A potential problem may occur when SMSF trustees elect to temporarily work overseas. Short-term temporary absences from Australia by SMSF trustees may not of itself create significant problems. However, if SMSF trustees depart Australia for an extended period, the fund might no longer meet residency requirements. If a SMSF is faced with losing its residency status, it should consider appointing an enduring power of attorney to act as trustee in that member’s absence. We recommend you seek legal advice in this area.

Further, if a member becomes a non-resident of Australia in a year, trustees should carefully consider whether or not to accept contributions or rollovers on behalf of that member, in order to protect the fund’s eligibility for tax concessions.

SMSF sole purpose test
SMSFs must be maintained for the sole purpose of providing members with retirement benefits, or providing members’ beneficiaries with benefits if the member dies before retirement. Other ancillary purposes are permitted, including payment of disability benefits for a member’s retirement due to ill health or in other approved circumstances.
SMSFs can’t use superannuation savings to provide pre-retirement benefits to members, employer sponsors or for estate planning purposes. The retirement income objective is paramount.

SMSF trustees must ensure the sole purpose test is complied with at all times. A person who breaches the test is guilty of an offence and significant penalties may apply. Failure to comply with the sole purpose test may also result in the fund becoming a non-complying superannuation fund for taxation and superannuation guarantee purposes.

Short-term investment

An investment that generally matures or is intended to operate for less than two years.

Simulator

A tool, calculation or experiment to recreate a specific situation in test conditions to model or monitor the outcome/what happens.

My super simulator is a calculator tool that takes information from the user, based on a range of questions, and estimates the superannuation outcome over time, subject to certain assumptions, such as economic and market performance conditions.

Small business superannuation clearing house

The Small Business Superannuation Clearing House is a free online superannuation payments service that helps small businesses with 19 or fewer employees meet their superannuation guarantee obligations.

Super contributions splitting

Super contributions splitting allows you to split certain super contributions with your spouse, made during the previous financial year. To be eligible, your spouse must be under 65 and not retired.

Up to 85% of concessional contributions may be split to your spouse’s super account. This includes employer contributions (including superannuation guarantee and salary sacrifice) and personal deductible contributions.

An application to split super contributions must be made in the financial year after the contributions have been made. However, if you leave the super fund during the year that the contributions are made, you can apply to split the current year’s contributions prior to transferring your total super balance to another super fund.
The benefits of splitting your super contributions are:

Your super benefits can be divided more evenly between you and your spouse.
A couple can split the funding of their superannuation and take advantage of 2 low tax thresholds on the taxable components of any superannuation benefit received in cash before age 60.
Splitting contributions in favour of an older spouse, who will reach retirement sooner, will allow earlier access to these funds.
Splitting contributions in favour of a younger spouse may improve Centrelink benefit entitlements.
Please note: the split contributions in your spouse’s super account cannot be accessed until they meet a condition of release such as retiring after reaching preservation age.

Superannuation

A pension or payment to a person retiring from work on reaching the preservation age. The term also refers to the accumulating contributions by employers and employees to a superannuation fund.

Superannuation contributions

Amounts invested into a superannuation fund.

Superannuation Guarantee Charge

The Superannuation Guarantee Charge (SGC) is a mechanism to ensure that employers contribute at least 9% of an employee’s salary to a superannuation fund or Retirement Savings Account (RSA). The SGC is the penalty imposed on an employer if they do not pay the required superannuation guaranteed contributions.

Superannuation pension/annuity offset

Where a pension or annuity is purchased with superannuation money from a taxed superannuation fund, recipients of these income streams who are at least preservation age but under age 60, or who are receiving the pension/annuity as a result of disability or death, will receive a 15% tax offset on the taxable portion of income from these sources.

Tax

A contribution made by people to fund the services provided by the government, such as transport, education or health services. The most common tax is income tax, which is a contribution made from income. The amount is usually a percentage of income that is determined by the amount of income earned.

Today’s dollars

The amount of money required for paying for something today, at current prices. The term is often used when referring to something that will happen in the future – when the same thing is likely to cost more in actual dollars – to give the user a sense of the relative cost, using today’s prices as a reference guide.

Total and Permanent Disablement

Total and Permanent Disablement (TPD) cover will provide a lump sum should a person suffer an illness or injury which totally and permanently incapacitates them from working. Proceeds from a TPD cover can be used to pay off debts, meet the costs associated with medical treatment / rehabilitation, provide support for dependents or establish an income stream to replace earnings.

Transition to retirement

Transition to Retirement is a superannuation condition of release that provides greater flexibility for you in structuring your work arrangements prior to retirement. For example, you could reduce your hours of work and use your super to start a non-commutable income stream to supplement your reduced salary.

Your superannuation fund may not offer non-commutable income streams and/or may apply additional restrictions. We recommend you contact your fund for further details.

There are 2 broad types of non-commutable income streams:

Account based allocated pensions with temporary commutation restrictions.
Non-commutable lifetime income streams (pensions and annuities).

Note: If you start a transition to retirement income stream, you will not be able to access your superannuation benefits as a lump sum cash payment until you meet a condition of release (for example you retire, or reach age 65). At that time, a non-commutable allocated pension will become fully commutable, and benefits can be taken as a lump sum if desired.

Trauma insurance

Trauma insurance or crisis benefits are paid when a specific condition or event occurs, for example a heart attack, cancer, or a stroke. Unlike TPD or income protection, a lump sum crisis benefit is paid upon diagnosis, and survival, of the defined condition. This benefit gives the insured a financial boost when it is needed most – in a time of crisis.
Having adequate crisis cover in place allows you to plan for expenses and gives you every opportunity to recover, both physically and financially.

Working test/work test

A government test for people aged 65 to 74 that stipulates the minimum number of hours a person must work in a year in order to be eligible to make non-concessional superannuation contributions. Currently, people must work 40 hours in a 30-day consecutive period during the year.