Superannuation is the most tax effective way for you to save for your retirement. But the laws are changing and the amount you can contribute to super will soon be reduced. There will also be a tax hike on contributions for some high income earners.
The changes are complex but they will have a clear result – it will be harder for you to maximise your super balance. That means less money in the low-tax super system to support your lifestyle in retirement.
The good news is you may have time to top up your super before the new rules come into effect on 1 July 2017.
But the clock is ticking. You need to review your situation urgently so any changes made to your super strategy can be implemented before the deadline. Particularly if you’re approaching retirement, earn a high income or have significant super savings.
Don’t get trapped when the rules for super change.
Speak to a Perpetual adviser today – we’re here to help.
A complex set of restrictions are being introduced on 1 July 2017 to limit the amount or personal contributions you can make to super. We strongly recommend contacting a Perpetual adviser to discuss how these changes will affect you.
Some of the new restrictions are:
Stricter caps on after-tax contributions and $1.6 million limit
From 1 July 2017, the annual cap on the money you can transfer into super from your after-tax income will be cut from $180,000 to $100,000.
Changes will also prevent people with more than $1.6 million in superannuation from making any further after-tax contributions. If you are in this bracket, then this may be your last chance to transfer additional funds into the super system.
Cuts in contributions before tax
Concessional contributions are before-tax contributions that you put into your super – salary sacrifice is a common way of doing this.
From 1 July 2017, concessional contributions will be capped at $25,000 per year for everyone. Until then people over 50 years of age can still contribute $35,000 – people under 50 up to $30,000.
Tax hikes for high income earners
If your taxable income is between $250,000 and $300,000, the tax paid on your concessional contributions will double from 1 July 2017. You will have to pay an additional 15% contributions tax on top of the 15% tax your super fund already pays.
If you have more than $1.6m in the pension phase of your super on 1 July 2017 you will be required to transfer the excess amount back into the accumulation phase or out of super completely. You can obtain capital gains tax (CGT) relief on assets you transfer back into the accumulation phase – allowing you to reset the cost base of those assets if desirable.
The changes to super will have the biggest impact on people approaching retirement, earning a high income or with significant super savings. Super remains a highly tax effective savings vehicle but you may end up with less for your retirement if you don’t act before the changes come into effect.
We strongly recommend reviewing your super by May 2017 so you can top up your balance, if eligible, before the deadline of 1 July 2017.
Depending on your situation, this could be your last chance to:
- Make super contributions at 15% rather than 30% tax
- Contribute up to $540k (after-tax) to your super
- Add more to your super if you already have a balance over $1.6m
If you have a Transition to Retirement (TtR) income you should consider whether this is the most desirable strategy for you going forward. On 1 July the tax exemption on TtR fund earnings will be removed.
At Perpetual, we’re experts in super and understand the real conversation is about the life you want to lead in retirement. So we’ll help you to cut through the complexity, taking the time to understand your personal circumstances to make sure you have the right super strategy in place before new legislative changes take effect.
Complex changes require expert advice
Depending on your circumstances, we can advise you on:
- Triggering the ‘bring-forward’ rule to contribute up to $540k (after-tax) to your super
- Adding more to your super if you already have a balance over $1.6m – this may be your last chance
- Making a final concessional contribution before an annual cap of $25,000 per year is introduced
- Obtaining capital gains tax (CGT) relief on assets you transfer back into the accumulation phase
- Rolling back your Transition to Retirement (TrR) income stream into super