Why you should put your savings into super

Significant changes to the superannuation contribution rules, which come into effect from July 1, means anyone who is still under 75 and is retired, should start looking at moving any spare cash they might have into super.

The reason for this is that once the funds are in super and are used to support an account-based pension, or your own private pension, they become tax free in terms of capital gains and income.

The changes have been prompted by the removal of the work test. Before, to contribute to superannuation, you had to pass a work test, proving you worked at least 30 hours in a 40-day period in the prevailing financial year.

This effectively stopped anyone in retirement, and who had stopped working in the paid work force, from making further contributions to super.

This meant any funds received after they retired such as an inheritance or the proceeds from the sale of an investment property, had to be held outside of super.

While these funds still enjoy some tax benefits due to the existing tax threshold of $18,000 and the application of the seniors and pensioners tax offset (SAPTO), you still need to lodge a tax return each year.

As well, if you were able to invest the funds and experienced a significant capital gain on these investments, this gain would be taxed as well.

While there is the usual fine print and proviso's that surround anything to do with superannuation, for most people with a super balance of less than $1.7 million there is now an opportunity to add to this balance even if they are retired.

It also simplifies the goal most Australians should aspire to in retirement and that is to own the property that they hope to live for the rest of their lives and place any additional funds into superannuation.

For couple, this can mean owning your own home and having up to $3.4 million in super and never having to pay tax again.