On 1 July 2017, some of the biggest changes to Australian superannuation came into effect – making what was already a confusing set of rules even more complex. Super remains the most tax effective way to save for your retirement, but the new rules may mean you need to rethink your tax plan.
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Non-concessional contributions, bring-forward rules, total superannuation balance. Does all this super talk have you reaching for the Panadol? Let’s bust some jargon. Scroll right to learn more.
Non-concessional contributions are contributions you can make to your superannuation from your after-tax income.
Asking yourself why you should bother putting after-tax money into super? It comes down to the potential earnings you can make on these contributions – they will be taxed at a maximum of 15%, potentially giving you a better after-tax return than the same investment outside super.
You can bring-forward two years’ worth of non-concessional contributions into your super, provided you are under the age of 65 and have not already triggered the bring-forward rule in the last two years. To trigger the bring-forward rule, you will have made a contribution exceeding $100,000 in a financial year.
Your total superannuation balance at a particular time is the sum of:
• the amount in your accumulation account
• any balance in your transfer balance account, and
• any super benefits you are in the process of rolling over, which are not reflected in your accumulation account or transfer balance account.
Time to rethink super and tax
The new changes to super make tax planning even more important for high income earners and people nearing retirement.
If the stricter contribution limits affect you, it’s the perfect time to speak to an adviser and work out the best tax plan for your circumstances.
Your options could include:
- Utilising the ‘bring forward’ rule to expedite your super contributions
If you are under the age of 65 and have less than $1.6m in super, you may be able to bring-forward up to three years’ worth of non-concessional contributions into your super. So instead of contributing a maximum of $100,000 in one year, you may be able to bring forward your contributions for the next few years and invest up to $300,000 into your super. That’s $300,000 which will be taxed at a maximum of 15 cents in the dollar rather than the marginal rate of up to 47 cents in the dollar.
- Putting your surplus income in alternative investment structures such as a family discretionary trust or insurance and investment bonds
These two structures are back in vogue. Whilst not as tax effective as super, they may be the next best thing. Also, they can be more flexible than super for people who wish to access their money before their superannuation preservation age.
SPEAK TO A SUPER EXPERT
Let our super experts cut through the complexity and help you put the right super strategy in place for your personal circumstances. Call us on 1800 631 381 or leave your details and a Perpetual adviser will be in touch.
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