06/04/2017

On 1 July 2017, big changes are coming to super.

Contribute extra before-tax money and take advantage of the tax benefits

Currently, people over 50 can contribute $35,000 per year. Or, if you're under 50 the limit is $30,000.

After 1 July, the maximum amount of before-tax money you can place into super is only $25,000 per year, regardless of your age.

Take the opportunity. Contribute an extra $5,000 - $10,000 this year because you won't be able to next financial year. Be quick!

Remember, before tax money - also known as concessional contributions - includes:

  • your employer's 9.5 per cent Super Guarantee contribution, plus
  • the voluntary salary sacrifice amounts you make.

Importantly, they are taxed at only 15 per cent. Much lower than most people's income tax rate.

Carry forward unused contributions

From 1 July 2018 new rules let people with super balances under $500,000 'carry forward' up to five years of the unused portion of their concessional contributions cap.

Case study

Mary makes a payment of $10,000 in concessional contributions in the 2018/19 financial year, and $15,000 in concessional contributions in the 2019/20 financial year.

In the 2020/21 financial year, Mary will be able to 'carry forward' her unused cap of $25,000 from the previous two financial years, plus the $25,000 limit for the year, for a total contribution of $50,000.

Contribute after-tax money and pay only 15 per cent on earnings

Currently, you can contribute $180,000 each year.

After 1 July, you can only contribute $100,000.

So, if you have savings or expect to receive a large payment, such as a bonus, you may want to place it into super before 1 July 2017 - rather than waiting.

The contribution cap 'bring forward' rule is also changing for contributions made with after-tax income.

The 'bring forward' rule lets you contribute up to three times the non-concessional contribution cap in a financial year (for those under age 65), by bringing forward your allowed contribution from the next two financial years.

Currently you can bring forward $540,000 over three years but after 1 July 2017 this will be reduced to $300,000. And, with the new $1.6 million super balance cap, the number of years you can bring forward your contribution will be limited by your super balance.

Check how close your balance is to $1.6 million if you are a pensioner or plan to retire soon

Currently, there is no limit to the amount you can transfer to a pension and receive tax-free earnings

After 1 July 2017, there will be a limit of $1.6 million that can be transferred to a pension account to receive the tax-free earnings.

So if you have a super or pension balance of around $1.6 million or more be sure to seek advice from your financial adviser before 30 June 2017.

Review your transition to retirement strategy

Currently, earnings on the investments behind a transition to retirement pension are tax free.

After 1 July 2017, earnings on a transition to retirement pension will be taxed at up to 15 per cent.

If you currently have or are considering a transition to retirement strategy you may need to re-consider this as an effective tax strategy. Speak to your financial adviser.

To take advantage of the opportunities available before 1 July 2017 or for advice on your particular circumstances contact your financial adviser.

IOOF Holdings Limited published this content on 06 April 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 13 April 2017 12:13:17 UTC.

Original documenthttp://www.ioof.com.au/ioof_news/super-changes-ahead

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