The superannuation system is set for a shake up. From 1 July 2017, the Government will:
The new legislation is expected to ensure the system is more equitable and sustainable as more people will be able to benefit from tax advantages to boost their savings.
Let’s take a more detailed look at some of the upcoming changes and what it means for Australians saving for retirement:
Currently the cap is:
Often, these contributions are in the form of employer contributions, such as super guarantee and salary sacrifice contributions.
In the new financial year, the government will reduce this cap to $25,000 for all Australians. It means that those aged 50 and over will be subject to a cap that’s around a third lower than they currently enjoy.
If you find yourself negatively impacted by the new caps, you may wish to consider the new carry forward rule which comes into effect on 1 July 2018 The new carry forward rule provides individuals with a total superannuation balance less than $500,000 the opportunity to carry forward unused cap amounts for five financial years.
Now is the time to seek advice and revise your contribution strategy before the change takes effect.
In addition to the annual concessional cap changes, the income threshold (where additional super contributions tax applies) will be reduced from $300,000 to $250,000 per annum.
From 1 July 2017, those with income greater than the new $250,000 threshold will be required to pay 30% tax (up from 15%) on concessional contributions.
Whilst most Australians will not be affected by the lower caps and higher tax rates, if you’re a high income earner or have a large amount of money in Super, you should consider revisiting your strategy to ensure you get the best financial outcomes and avoid any potential penalties by exceeding the new caps.
Currently only certain people can claim tax deductions for personal contributions.
However with the change from 1 July 2017, all individuals under age 65 (and all those under age 75 who pass the ‘work test’) will enjoy more flexibility by being able to claim a tax deduction for personal contributions made to super. These contributions are taxed at the universal ‘concessional’ rate of 15%, which is also known as the ‘contributions tax’.
The new legislation will have an impact on Australians both positive and negative. Whatever your circumstances, it is a good idea to consult a financial planner before 30 June 2017 to find out if there is any action you need to take both before and after the changes take place.
If you would like to find out more, now is the time to call us on 1800 806 645 - we'll introduce you to our colleagues at MyState Wealth Management for an obligation free discussion. For more information, visit mystate.com.au/wealth.
Information is current as at 21 February 2017. This is general advice only, before making any decisions please speak with a MyState Wealth Management Financial Planner.