THERE were many proposed changes to the superannuation system announced at this year’s Federal Budget that could affect the way individuals plan for retirement.
“It’s important to understand what these are to make the best decision possible about how to maximise your wealth when you finish work for the last time,” MyState Wealth Management financial planner Philip Hall said.
Some of the most significant changes are described below:
Concessional caps reduced
One of the most significant changes has been a reduction to the amount you can contribute to your super fund each year and claim a reduction on your income for tax purposes.
The technical name for this amount is the “concessional cap”.
From 1 July 2017, individuals will only be able to contribute $25,000 each year to their super fund and be able to offset this amount against their taxable income.
At the moment, people 50-years or older can contribute $35,000 a year and people younger than this can contribute $30,000 a year to their fund and receive a tax benefit.
It’s a good idea to talk to a financial adviser if you’d like to take advantage of the higher limits before they change next year.
Lifetime non-concessional limits amended
Another substantial change is a shift in the amount you can contribute to your super fund on an after-tax basis.
Since 7.30pm AEST on 3 May 2016, individuals could only contribute $500,000 during their lifetime on a non-concessional basis.
Prior to the cut-off, people could contribute $180,000 a year on a non-concessional basis and bring forward two-years of contributions, effectively allowing them to contribute $540,000 to their fund in one year.
The new rules are being retrospectively applied so that from 1 July 2007, individuals can only contribute $500,000 to their super fund on a non-concessional basis.
While people who have contributed more than this amount won’t be retrospectively penalised, they must not make additional contributions from this point.
Again, seek advice from a financial adviser if you would like further information about this change.
Work test removed
Another change has been the removal of a requirement for people aged between 65 and 74-years to have worked a certain number of hours a week to be able to make voluntary contributions to their super fund.
From 1 July 2017, anyone younger than 75-years can make voluntary super contributions without needing to have worked a certain number of hours each week.
Super is a complex area and it pays to seek advice if you are unsure of how these changes work and to ensure you’re making the most of the concessions that are available to you.
If you would like to find out more, phone Philip Hall at MyState Wealth Management on 1300 651 600 or visit mystate.com.au/wealth.
Information is current as at 23 May 2016 but is subject to being passed into law by the Federal parliament. This is general advice only, before making any decisions please speak with a MyState Wealth Management Financial Planner.