Changes to super legislation reduce before-tax and after-tax contribution caps from 1 July 2017. Are you super organised?
The consequences for you of not taking action with regards to the super changes include the possibility of retiring with a smaller capital base with which to fund your retirement. This may mean you will have to make lifestyle compromises once you have stopped earning and this is why we suggest you seek professional advice promptly to find out what you can do before 1 July 2017. For example, you may be able to benefit from having more funds in a tax advantaged environment by making maximum deposits into your super fund before the new limits become effective. This will have the potential of increasing the capital base that will fund your retirement lifestyle and experiences.
1. Changes to the Non-concessional Contributions Cap
A reduction in the current annual non-concessional (NCC) cap from $180,000 to $100,000 will be introduced from 1 July 2017. Non-concessional contributions are contributions made to super from after tax monies.
In the 2016/17 financial year, a window of opportunity remains to contribute NCCs of up to $180,000 or, for those under age 65, to utilise the bring-forward rule to contribute up to $540,000 before the end of June. After July 1 2017, the three-year bring-forward provisions will remain but the limit will be up to $300,000.
There are other considerations and caps to be aware of if you have larger super balances. For example, once you have reached a $1.6 million ‘transfer’ cap your future NCC cap will be nil. This could impact you if you have larger amounts of money, such as from the sale of an investment property or an inheritance that you wish to contribute to your super fund.
2. Changes to the Concessional Contributions Cap
Changes to the concessional contributions cap will affect you in particular if you are 49 or more and have access to the current concessional contributions cap of $35,000.
Concessional contributions include employer Superannuation Guarantee (SG) contributions and salary sacrifice contributions as well as tax deductible contributions for self-employed persons. Boosting your contributions (up to the cap) through salary sacrifice can be a highly tax effective strategy. However, recently legislated changes will make it more difficult to move large sums of money into your super.
The current concessional contributions caps of $30,000 or $35,000 (depending on your age) will both be reduced to $25,000 from 1 July 2017. This situation gives you until 30 June 2017 to make the most of the higher cap by contributing up to $30,000 in concessional contributions (or up to $35,000 if you are over 50). In the 2017/18 financial year, the new cap of $25,000 (which includes your employer’s 9.5% contribution) will apply to everyone.
By taking action now with respect to your super contributions, you can maximise your opportunities for boosting your retirement capital, with the aim of maintaining your current lifestyle once you are no longer earning and avoiding the need to compromise on holidays, travel, leisure activities and so on. Taking action now also gives you time to put in place the most appropriate super strategies for your unique circumstances. However, it is very important that you do not exceed your annual cap as there are penalties if you do. Always ensure you are aware of how much of your cap has already been used – including any employer contributions which have been made on your behalf. If you are unsure we urge you to speak to us.
3. Your Next Step …
We invite you to contact your financial adviser at Stratus Financial Group to discuss which of these changes create opportunities for you to benefit. We can respond to specific questions as well as review your overall super strategy with a view to helping you plan towards a healthy super balance when you retire. Please contact Stratus Financial Group on (07) 3007 2007.
At Stratus Financial Group, we help families, professionals, executives, business owners and retirees manage their complex financial affairs and coordinate their professional advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Stratus Financial Group strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
Taxation outcomes are illustrative only. Always confirm your tax position with a registered tax agent.