The 2016 Federal Budget paved the way for several changes to superannuation contributions, the majority of which come into effect from 1 July 2017. While the changes are still proposals and are yet to be legislated, Research and Technical Manager, Matthew Lapinskas from Money Solutions highlights 4 key things which may impact your retirement planning.
5K reduction to the concessional cap
In the habit of making additional super contributions? As of 1 July 2017, if legislated, the concessional cap will reduce from $30,000 (currently $35,000 for those over 50 at any point in the financial year) to $25,000 per annum.
Despite this reduction, concessional contributions could still be a tax efficient way of boosting your balance. Work out how additional contributions could make a difference to your super balance with our retirement planner.
Less than $500K in super? Catch up with your contributions
If your super balance is under $500k, and you didn’t reach your concessional contributions cap in the previous year, then you will be allowed to make surplus concessional contributions in the following years.
If implemented, this comes into effect on 1 July 2017, with surplus contribution cap amounts carried forward on a 5 year rolling basis. For example, while the concessional contribution cap is reducing, an individual will effectively be able to contribute up to $125,000 in concessional contributions in the 2021/22 financial year if they have not made any contributions since 1 July 2017.
Using catch up contributions could be an effective way to grow your super balance, possibly in combination with a Transition to Retirement (TTR) strategy. You may also benefit from the concessional tax treatment of super contributions which may be lower than your marginal tax rate.
If you have a spouse, you may consider splitting contributions to keep account balances under $500,000.
$500K lifetime cap on non-concessional contributions
The current $180,000 non-concessional (after tax) annual contribution cap will be replaced with a new cap, limiting non-concessional contributions to $500,000 for an individual’s life time. If you have a history of making additional contributions after tax, this change could impact the way you save into your super going forward.
If implemented, this comes into effect from 7.30pm on 3 May 2016, and all non-concessional contributions from 1 July 2007 will count towards the cap.
Contributions for individuals ages 65-74
There’s good news on the horizon for those nearing or in retirement. If legislated, if you’re aged over 65, and aged under 75, you will be able to contribute to your super regardless of your work status as of 1 July 2017. This could be helpful if you receive a windfall, for example, and want to add to your super fund.
In addition, the proposed rules mean you can also make spouse contributions to a spouse under age 75 (compared with the current limit being 70 years).
Want to know more? Contact 133 464
The information contained in this blog post is general in nature. It does not take into account your personal goals, financial situation or needs. As such, the information contained in this blog post is no substitute for personal financial advice. Money Solutions Pty Ltd is a member of ASFA, the FSC and a Professional Partner of the FPA. Money Solutions holds an Australian Financial Services Licence (AFSL 258145), ABN 36 105 811 836
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Home and Contents Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.