A number of important announcements about superannuation were released at this year’s federal budget on 3 May. But as a federal election was formally called just after the budget was released, no definitive outcomes regarding these announcements will be known until after the election.
Whatever the outcome of the election, it’s entirely possible the budget announcements, or variations of them, will ultimately become law. So here are five factors to consider right now to put your super in the best possible position.
- Maximise current concessions
It’s been proposed that the cap on concessional contributions, which include employer, salary sacrificed and voluntary contributions will be lowered to $25,000 from 1 July 2017. At the moment, people aged 50 and over can contribute up to $35,000 to their fund and offset this amount against their income, and people younger than this can contribute up to $30,000 and receive a tax benefit. So make sure you maximise the level of contributions you can afford to make this year before these changes are likely to happen.
- Be aware of contributions previously made to super
A lifetime cap of $500,000 has been placed on non-concessional (or after-tax) contributions, with immediate effect from budget night. This cap includes any after-tax contributions made to your super since 1 July 2007. While contributions made before budget night in excess of this amount won’t be penalised, if you have reached the limit it’s important not to contribute additional funds, or you risk being penalised. It’s important to understand how you are placed against this new cap to ensure you don’t inadvertently exceed it. It’s still good practice to keep a record of previous years’ contributions, even if this doesn’t become law.
- Take advantage of positive initiatives
There was good news for older people who still want to work and contribute to their super fund. From 1 July 2017 people aged between 64 and 75 won’t have to work a certain number of hours each week to be able to keep contributing to super. Some people in this category, for instance the self-employed, may even be able to claim a tax deduction for some contributions to super.
- Super still super
Despite proposed changes to the super system, it’s important not to lose sight of the fact the maximum tax rate on earnings within super is still 15% and that withdrawals from your super fund are tax-free when you reach 60. So super still remains one of the most tax-effective investments available.
- Don’t over react – take a considered approach
There is uncertainty about the outcome of the proposed changes to the super system. Although changes are likely, some people will be better off if the amendments go ahead.
If you’d like to find out how you can make the most of the current super concessions and ensure you don’t fall foul of the law, contact us today.