The end of financial year coming to a close.
As part of the Federal Budget and subsequent announcements, the Government is making significant changes to super contribution rules.
If you are looking to make a top-up contribution into your Superannuation for this financial year, please make sure that your contribution is processed no later than Monday, the 26th June 2017. Don’t leave extra super contributions to the last minute. The ATO generally takes the view that the super fund needs to receive the contribution by 30 June in order for it to be considered a contribution for this year. Making a contribution by electronic transfer on 30 June may result in it being received by the fund in early July.
This video by ANZ Technical Services Manager Mark Gleeson highlights the important changes to superannuation. Keeping these in mind, it is important to remember that despite the changes, there are still opportunities for you to take advantage of before the financial year ends.
This financial year has seen some of the biggest super reforms since July 2007, with these reforms to super contribution rules and limits set to change from 1 July 2017. It is worth understanding how the new rules will affect you and your financial strategy.
SUMMARY OF THE SUPER CAP CHANGES
*Note: if you’re over 65 at the time of making a contribution, a work test must first be satisfied. For more information on concessional caps as of 1 July 2017, please refer to the Colonial First State Concessional Contributions webpage here.
Before-Tax (Concessional) Super Contribution Opportunities
There’s an opportunity to contribute an additional $5,000 (or $10,000 if you’re turning 50 or over) in before-tax super contributions than what will be possible once the cap is reduced on 1 July 2017.
After-Tax (Non-Concessional) Super Contribution Opportunities
- There is an opportunity to contribute $80,000 more in after-tax super contributions than what will be possible when the cap is reduced on 1 July 2017.
- If you are under 65, you could also bring forward three years’ worth of after-tax contributions up to a maximum of $540,000, which is higher than the $300,000 limit that will apply on 1 July 2017.
- Another thing to note is that from 1 July 2017, individuals with a total super balance of $1.6 million (or above), will not be able to make any further after-tax contributions. This means the current financial year may be the last opportunity where you can make an after-tax contribution.
Other things to be aware of….
- More people may start benefitting from spouse contributions. Currently, an individual making a contribution into their spouse’s super account may be entitled to a maximum tax offset of $540 if certain requirements are not met.
- From July 1 2017, the government will increase access to this spouse super tax offset by raising the lower income threshold for the receiving spouse from $10,800 to $37,000.
- The amount of super you can move into a pension will be limited from 1 July 2017. If you’re converting your super into a pension to derive an income in retirement you’ll be restricted to transferring a maximum of $1.6 million into a tax-free pension account, not including subsequent earnings.
- If you already have a pension balance above that, the excess must be placed back into the super accumulation phase (where earnings will be taxed at the concessional rate of 15%), or taken out of super completely by 1 July 2017 to avoid potential penalties.
Transition to Retirement
- Investment earnings on super fund assets that support a pension are currently tax free. However this will no longer apply to transition to retirement (TTR) income streams.
- Earnings on fund assets supporting a TTR income stream will be subject to the same maximum 15% tax rate that applies to super accumulation funds from 1 July 2017.
For more information, take a look at the Modoras Financial Planning Solutions EOFY Super Tax Thresholds
If you are uncertain as to how much you have contributed under these rules in the past, or how these changes may impact you, we strongly encourage you to contact our office on 1300 850 757.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the information, consider its appropriateness to your circumstances.